Hamsterdam becomes the "Come Home Zone" in the Oliver neighborhood of Baltimore.
The irony! Oliver, the East Baltimore community whose manifest blight attracted film crews from David Simon’s celebrated HBO series, “The Wire,” is now attracting market-rate homebuyers from the Baltimore suburbs, from Rochester, New York and from Norfolk, Virginia.
Oliver, once a real-life counterpart to the forbidding, despairing violence that “The Wire” seemingly forever linked to Baltimore, has yielded to crime-reducing and quality of life improving stratagems of a homebuilder, David Borinsky, the originator of the “Come Home Baltimore” concept. David has been working since 2010 to attract middle-income homebuyers to Oliver without causing displacement or marginalization of long-time residents. He has done so by coupling renovated homes with a compelling message. To existing Oliver residents, the message is that Oliver belongs to them. To homebuyers, the message is that they are not just buying a house but that they are joining a community: they are ‘coming home.’
The Come Home Zone Development Company is a privately funded initiative focused on rebuilding Baltimore City neighborhoods. First and foremost its mission is as a housing developer which acquires vacant, abandoned, and neglected housing stock, matches the stock to new market rate owner occupants and then custom builds those houses into the home of those owner’s dreams. Since 2010, the Come Home initiative has helped create a market for owner-occupied homes in the community. Its success in attracting market-rate buyers is built on two complementary strategies. The first is offering high-end but affordable renovations. The second is the draw of the neighborhood itself: a community undergoing healthy, organic change that is rooted in its social history and that is respectful of existing residents.
The rewards, therefore, of the Come Home Baltimore concept are shared equally by new buyers and existing residents.
And those rewards can be expressed in a single value that animates the homebuilder: ‘the warm pleasure of rediscovered community.”
Now the Come Home Zone Development Company, LLC (the developer) has been created to implement the next phase of regeneration in Oliver. The developer plans to acquire and renovate two abandoned houses in the neighborhood and sell them to market-rate buyers. The developer’s mission is “doing community development right” by targeting only abandoned properties for renovation, and by being respectful of the interests and sensibilities of the community’s existing residents.
And while Come Home Zone is squarely focused on building affordable homes, integral to its value proposition is adding to the social capital of the neighborhood as well. The Developer plans to do this by coordinating nonprofit service providers to deliver services and financial resources to members of the surrounding community. He also plans to advocate for and partner with government agencies and other civic institutions with the goal of enhancing the quality of public and quasi‐public institutions that serve the community. This might include, by way of example, cooperating with healthcare and social service organizations to more efficiently serve their clients and coordinating various afterschool and child mentoring programs.
The developer plans to follow the same process for each renovation. An abandoned house will be purchased by the Developer and immediately marketed to a buyer. Other than site preparation, regulatory approvals, necessary stabilization and some cosmetic improvements, no construction is planned until the property in question is under contract to a pre-qualified buyer.
Following the lead of the emerging market, the houses are planned to be renovated to attract buyers in all income brackets. In addition to the high-quality renovation and the allure of participating in the rebirth of a storied East Baltimore community, buyers are also expected to be drawn by an array of buyer-assistance programs, many of which are not restricted by income. These have been popular with other home purchases in the immediate neighborhood. For example, both and the State of Maryland, through the Commission for Historical and Architectural (CHAP) program, currently offer substantial credits against state and city taxes if the buyer's home has been renovated so as to preserve the historic nature of the structure. Furthermore, the city currently contributes $10,000 towards the purchase of previously vacant properties that are renovated to current building code standards through a program called Vacants to Value. Both unrenovated houses that the Developer plans to purchase are expected to qualify for all the foregoing credits and grants.
Another example of buyer-assistance currently available without respect to income is the Live Near Your Work grant program offered by Johns Hopkins University. These grants, which vary in size, are offered to buyers who are employed by Hopkins, including employees of all of the John Hopkins University medical institutions located within walking distance of the neighborhood.
Development time, from purchase of each vacant property, through renovation and sale to a homeowner, is anticipated to average nine months. Although the two house renovations may vary based on the condition of the property, the choices made by the buyer and other factors, a typical timeline is expected to be as follows:
Finalize contract to buy two unrenovated properties
Buy the properties
Days 20 - 80
Market to home-buyers
Sign a contract with two homebuyers
Homebuyers select finiishes
Submit plans for historic designation
Maryland Historic Trust approves historic designation
Construction complete and certificate of occupancy issued
|Days 270 - 280||
Properties are transferred to the home-buyers
As stated above, it is planned that renovation work will not commence until either house is under contract to a pre-qualified homebuyer. We believe the predominant experience of other builders in this area confirms that this is a valid and reasonable strategy. It is anticipated that investors will have a title company-insured first lien on each house, which will be downgraded to second position, behind the construction lender once construction begins.
The cost of renovating each house, including acquisition, design, construction and cost of sale, is expected to range from $160,000 to $200,000. The smaller, less expensive to renovate houses are expected to sell for in the range of $200,000 to $225,000 and the larger, more expensive to renovate houses are expected sell for in the range of $225,000 to $290,000. This downloadable project budget is based on an average cost of $185,000 for renovation and $237,500 in sales prices, which is a little lower than the average. And we’ve listed some some recent nearby sales of homes of comparable size and quality in this attached table.
The row house at 1800 North Broadway, pictured pre-renovation above is an example of a renovation the developer has previously completed. It sold for $267,500 in December, 2017. The carousel below contains images of a number of projects tackled and completed by David previously.
Alan David Borinsky founded and is the manager of CHZ Management, LLC, the manager of the Come Home Zone Development Company, LLC. Jack Foster joins him as a joint owner of the Come Home Zone Development Company, LLC. The company’s near and medium-term ambitions are to develop a replicable/profitable homebuilding program that leads to a low-crime, economically integrated neighborhood with no displacement of longtime residents.
Prior to starting his real estate company in 2006, David, an attorney, served as the chairman of the tax department at a Baltimore-based law firm with large real estate and financial services practices. As a lawyer, he lectured and wrote frequently on nonprofits, business planning and real estate. He has also served on the Maryland State Bar ethics committee. He received his college and law degrees from the University of Virginia and a Masters’ degree from New York University’s Graduate Tax Program. David is a lifelong resident of Baltimore City and has been active over the years in many local nonprofits.
David took a break from the practice of law in 2006. Initially, his company financed the renovation of properties scattered across the Baltimore metropolitan area. The business soon evolved into a scalable homebuilding program aimed at creating a low-crime, economically integrated neighborhood with a focus on avoiding displacement of longtime residents. David's responsibilities as manager will include acquisition, management and marketing.
Jack Foster spent over 30 years with Franklin Templeton, with his primary experience during the latter part of his tenure consisting of overseeing investment in real estate funds. Approximately two years ago, he took over the operation of Foster Homes, a Baltimore-based homebuilder founded by his father. Foster Homes has constructed over 2,500 homes since its founding.
Jack brings the team at Foster Homes to this project. This includes a construction supervisor and a marketing professional who also operates a residential brokerage firm with experience in marketing urban properties. Both have been employed by Foster Homes for 20 years.
The Oliver neighborhood of Baltimore is best known for its starring role in the award winning series, “The Wire.” There it was depicted brutally – depressed, abandoned and with racial unrest. Once a middle-class neighborhood, it had slipped from that solid pedestal in the last century. By 2000, 25% of Oliver’s housing units stood empty. More recently, with the help of several organizations, the area has begun to revitalize with a steady and increasing stream of diverse families and young professionals returning to the Oliver community. Transformation is underway.
Employment opportunities generally lie at the periphery of the community: (i) Johns Hopkins Hospital, (ii) a district court house at the northwest corner of the community, (iii) one of the city’s largest funeral homes and, (iv) approximately one-and-a-half miles to the southwest, Baltimore’s central business district and the Baltimore harbor.
Who is our buyer? The first several dozen Come Home Baltimore buyers were moderate income families. More recent buyers consist of a multi-ethnic mix of working-class, non-medical professionals (social workers, Hopkins technicians) and professionals (lawyers and doctors). Often buyers have moved from elsewhere in Baltimore City or surrounding suburbs or from out-of-state. Typically, they have mid and high-five figure household incomes and, owing to the requirement that they qualify for standard, market rate, unsubsidized institutional financing, all have a household member with regular income. Household size tends to be two to three household members, with a mix of couples without children and single mothers with either one or two children. Each of those categories of buyers is a likely buyer going forward. Examples of buyers include an attorney working for Baltimore City and his wife; a Towson University faculty member and an epidemiologist employed at Hopkins Hospital.
With its partners, Come Home Baltimore has attracted and coordinated thousands of volunteer hours – with many of those hours donated by existing and new residents. In addition, T. Rowe Price, UnderArmour, Carefirst, Constellation Energy, The Associated Jewish Charities and the Hopkins Carey School of Business have sponsored volunteer projects in Oliver. As part of this coordinated effort, Come Home Baltimore’s nonprofit partners have received grants and other assistance from the Abell Foundation for security cameras and gardening equipment, from the Parks and People Foundation for farm infrastructure assembled on what had previously been an open-air drug market and from Civic Works for placement of community residents in job readiness programs. An active listserv, stoop-front Friday evening happy hours and other informal activity in the public space reflect the emergence of community cohesion. New residents are encouraged to be active volunteers in the community. Oliver’s intrinsic advantages are contributing to its rebirth. These include proximity to the Hopkins medical complex and blossoming development activity in the Hopkins-sponsored development footprint, which is sandwiched between Hopkins to the south and Oliver and an adjoining community to the north.
The Company is engaged in two simultaneous offerings of its securities:
• An offering under Regulation CF (where anyone can invest), which we refer to as the “Reg CF Offering”; and
• An offering under SEC Rule 506(c) (where only “accredited investors” can invest), which we refer to as the “Reg D Offering.”
We plan to use the proceeds of the two offerings, with a maximum goal of $100,000, together with a loan from a bank, to purchase, renovate and sell two row houses in the Oliver neighborhood in Baltimore. If we raise at least $50,000 in the two offerings we will purchase, renovate and sell one row house, and if we raise $100,000 we will purchase, renovate and sell two.
It doesn’t matter how much is raised in the Reg CF Offering and how much is raised in the Reg D Offering. Thus, if we raise $1,000 in the Reg CF Offering and at least $49,000 in the Reg D Offering we will proceed, and vice versa.
In an offering under Regulation CF the issuer is required to state a “Target Amount,” meaning the minimum amount the issuer will raise in the Regulation CF offering to complete the offering. For the reason just described, our Target Amount for the Reg CF Offering is $1,000. However, we will not complete the Reg CF Offering OR the Reg D offering unless we have raised a total of at least $50,000 (the “minimum goal”) by Decvember 31, 2018 (EST). If we haven’t, both offerings and all investment commitments will be cancelled, and all committed funds will be returned.
If we raise a total of at least $50,000 by December 31, 2018, but less than $100,000, we will do one of two things – 1) raise the additional funds needed for the 2nd house through another avenue or 2) return the excess over $50,000, on a pro rata basis.
In both offerings, the minimum investment is $500, and investments above $500 may be made in $250 increments (e.g., $750 or $1,000, but not $636). Investors can cancel their commitment up until 11:59 pm on December 29, 2018 (EST), two days before the offering ends. After that, as long as the minimum goal amount has been met, any funds raised will be released to the developer and investors will become shareholders of the company. The developer may decide to change the offering deadline but will provide at least five days’ notice of such a change to all investors. And investors will also be notified and asked to reconfirm their commitment if any other material changes are made to this offering.
Each investor will receive an annual preferred return of 8% on their investment, which will accumulate but not be compounded. In addition, investors will receive a pro-rata share of 30% of any profit on the project. This 30% is assigned to the total equity goal of $100,000. If, for example, an investor were to invest $1,000, that investor would receive one hundredth ($1,000 divided by $100,000) of the investor group’s aggregate thirty percent share of profits.
The full disclosure documents, which include Form C can be downloaded here and viewed along with the progress report Form C-U (which registers that we have reached our Target Amount) on the Securities and Exchange Commission’s website here.
If the Company is profitable, distributions will be made annually. Under the LLC Agreement, the source of the distribution is immaterial. Instead, all distributions will be made in the following order of priority:
- First, the available cash shall be distributed to the Contributing Members until they have received their Preferred Return for the current year.
- Second, the balance of the available cash, if any, shall be distributed to the Contributing Members until they have received any shortfall in the Preferred Return for any prior year.
- Third, the balance of the Available Cash, if any, shall be distributed to the Contributing Members until they have received a full return of their Unreturned Investment.
- Fourth, the balance of available cash, if any, shall be distributed:
- 30% to the Contributing Members; and
- 70% to Sponsor as a promoted interest.
The table below llustrates our estimate of how much an investor would receive for a $1000 investment made under three scenarios, if the houses sells at an average of $237,500 per house, or a little less ($220,000) or a little more ($250,000), and if the full balance of equity is repaid in 1 year.
|Sale price||$220,000 per house||$237,500 per house||$250,000 per house|
|Total sales (2 houses)||$440,000||$475,000||$500,000|
|Less construction financing||($271,300)||($271,300)||($271,300)|
|Equity refunded to SC investors||($100,000)||($100,000)||($100,000)|
|8% preferred return over 1 year||($8,000)||($8,000)||($8,000)|
|Return to investors|
|8% preferred return||$8,000||$8,000||$8,000|
|30% profit share||$12,360||$19,335||$26,010|
|Return of equity invested||$100,000||$100,000||$100,000|
|Total returned to investors||$120,360||$127,335||$134,010|
|Total return on a $1000 investment||$1,204||$1,273||$1,340|
Caution: This table is merely an illustration based on current assumptions and estimates as of the date of this offering and may change at any time based on market or other conditions and may not come to pass. All investments carry risk of loss and there is no assurance that an investment will provide a positive return. Many things could go wrong with this offering, including those listed in the Risk Factors.
A crowdfunding investment involves risk. You should not invest any funds in this offering unless you can afford to lose your entire investment.
In making an investment decision, investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. These securities have not been recommended or approved by any federal or state securities commission or regulatory authority. Furthermore, these authorities have not passed upon the accuracy or adequacy of this document. The U.S. Securities and Exchange Commission does not pass upon the merits of any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering document or literature.
These securities are offered under an exemption from registration; however, the U.S. Securities and Exchange Commission has not made an independent determination that these securities are exempt from registration.
There are numerous risks to consider when making an investment such as this one and financial projections are just that - projections. Returns are not guaranteed. Conditions that may affect your investment include unforeseen construction costs, changes in market conditions, and potential disasters that are not covered by insurance. Download this risk disclosure for a more expansive list of potential risks.
Unless otherwise noted, the images and videos on this offering page are used to convey the personality of the neighborhood in which the project is planned. Properties shown in these images are not included in the offering and investors will not receive an interest in any of them.