An Opportunity Zone Fund and crowdfunding will help repurpose this vacant industrial building into a lively mix of uses in Philly.
Golaski Labs is a $7.2 million, 40,000 square foot planned mixed-use development located at the corner of Wayne Avenue and Apsley Street, a visible corner on a commercial corridor in Wayne Junction, Philadelphia. The site is the former Dacron blood-vessel replacement manufacturing factory located at 4537 Wayne Ave, Philadelphia, PA 19144 (the “Property”).
The Property has been owned by the Golaski Family since the 1970s (the “Golaski Family”). After the death of their father, the Golaski children approached Mosaic Development Partners, LLC ("Mosaic Develoment") to develop a partnership to revitalize the Property into an innovative, chic and transformative community project, similar to Mosaic Development’s award-winning Eastern Lofts Project in Strawberry Mansion. The former manufacturing facility will be rehabilitated to house 1) an open kitchen studio/restaurant operated by famed Brooklyn chef Sylva Senat, 2) a multi-cultural co-working space to serve as an incubator and training facility for start-ups, early stage and established business entities, 3) thirty-nine residential units and a private courtyard and 4) the new headquarters for Roofmeadow, a woman-owned landscape architecture and civil engineer design firm specializing in green roofs (the “Project”).
Mosaic Development generally combines tax credits, grants and debt to support the development of their projects. Since the Project will utilize New Markets Tax Credits (“NMTC”) and take advantage of the newly enacted Opportunity Zones, the legal structure is complex. You can download a chart of the Project’s legal structure here. To provide for this structure, Mosaic Development created several entities. There are two companies that investors may invest in. Depending on investors’ personal finances, they may invest in the Reg CF offering and purchase limited liability company interests in Mosaic 4537 or invest in the Reg D (506(c)) offering and purchase limited partnership interests in Mosaic Opportunity Zone Fund, LP (“Mosaic OZF”) or invest in both offerings. The returns outlined in this offering requires an investment in the specific company. Throughout this offering, the use of Company refers to either Mosaic 4537 or Mosaic OZF, based on the context. We also refer to Mosaic 4537 and Mosaic OZF together, as the “Companies”.
The Wayne Junction section of Philadelphia is one of Philadelphia's older neighborhoods which has suffered from years of neglect and loss of investments. The Project is located in census tract 42101024400 (the “Census Tract”). According to the US Census Bureau, the Census Tract has a poverty rate of 30.5% and is considered a severely distressed neighborhood. In addition, the Census Tract is also an Opportunity Zone. The recently passed Tax Cuts and Jobs Act of 2017 created Opportunity Zones, which are economically-distressed census tracts designated by the state governments where new investments, under certain conditions, may allow some investors (those who invest in the Reg D (506 (c)) offering (described in “About the Offering”) to claim tax breaks on capital gains taxes, depending on how long they hold investments in the property in an area designated as an Opportunity Zone.
The Project is situated on a one-acre site and is poised to create a catalyst for positive change by bringing new commerce and high-quality market and affordable housing to the community. When complete, the Project will comprise of a mixture of old and new. Further, the Project will be constructed using modular building techniques on the vacant land of the Property. The residential units will be equipped with hi-tech voice/phone control technology and rents will be targeted between 80% - 120% of area median income (“AMI”). HUD establishes income limits for assisted housing every fiscal year. These income limits are available by family size and are defined as “extremely low income” (30% of area median income), “very low income” (50% of area median income), “low-income” (80% of area median income) and “moderate income” (120% of area median income).
Other planned amenities are a 24-hour fitness room, secure bike room, a zip car space and additional limited on-site parking. The Project is within walking distance to the Wayne Junction regional rail station, which is an 11-minute train ride to Center City Philadelphia. The Project is complimentary to other planned development projects in the neighborhood. Another developer, Ken Weinstein, has acquired and plans to invest approximately $12 million to rehabilitate seven surrounding buildings.
The Project has support from the community and Councilwoman Cindy Bass, the local Philadelphia councilperson for the 8th District. The development team will be working this fall to finalize zoning, construction plans and the final capital stack with an intended 4th quarter 2018 closing. Construction completion is planned for Spring of 2020.
The development team includes the following:
|Developer||Mosaic Development Partners, LLC, an MBE firm|
|Architect||ALMA Architecture, a WBE firm|
|Civil engineer||Ambric Technologies|
|Geotech engineer||Ambric Technologies|
|Tax Credit consultant||Robert Jacobs Consulting|
|Tax Credit & Securitiies counsel||Savage & Associates Law Group, a WBE firm|
|General counsel||Christopher Booth, Esq., an MBE firm|
|NMTC allocates||Philadelphia Industrial Development Corporation|
|Tax Credit investor||US Bank|
Mosaic Development, the developer and managing member of Mosaic 4537 (the general partner of Golaski Labs, LP) will structure the purchase and renovation of the Property. The Property will be purchased by Golaski Labs, LP. Mosaic Development is a Philadelphia based minority certified commercial real estate development company. Mosaic was founded by Gregory Reaves and Leslie Smallwood-Lewis in 2008 after collectively working for over fifteen years at a privately held real estate development firm in the Philadelphia area. Mosaic Development started its journey to help breathe new life into communities in one of the most difficult economic times in the history of real estate development, but Mr. Reaves and Ms. Smallwood-Lewis, remained persistent, faithful and focused on improving communities through the redevelopment of real estate. Mosaic’s operating philosophy is based on three tenets: Autonomy - Mastery - Purpose. They strive for “Gentrigation”, a term created by Mosaic Development: “the process of improving the quality of the housing infrastructure and overall economic impact of historically impoverished communities without substantially displacing the families who live in those communities.”
To accomplish this goal, Mosaic Development builds in communities on once vibrant blocks that have suffered years of neglect. They build in communities that seek diversity of income, housing and jobs while maintaining a strong sense of community, all while still generating solid returns for their investors and lenders. Mosaic Development and its partners have secured and invested more than $54 million in Philadelphia neighborhoods, resulting in socially conscious, sustainable developments, the removal of blight, the creation of hundreds of construction jobs and permanent jobs in impoverished communities, that have spurred additional investment from developers, near Mosaic Development projects.
Mosaic has mastered how to use social equity investments to rebalance the inequalities inherent in impoverished communities. These investments are usually one-time infusions of capital to help revitalize a community and assist with helping the development project stand on its own over the long-term. Such investments come in the form of: tax credits, low interest loans, grants, abatements or credit enhancements. They usually make up somewhere between 30 – 40% of project costs to offset below market future rents and generate adequate annual returns to stabilize the property over the long-term. These investments are in addition to private equity investments that are included in every project and are usually mechanisms that come directly from government or quasi-government enterprises that lower the cost of operation, construction or cost of living for the end user.
Eastern Lofts, Edison Square and Edison 64 stand out amongst Mosaic Development and its partners past projects. The 60,000 square foot warehouse now known as Eastern Lofts sat vacant for more than 30 years before Mosaic Development converted it into a mixed-use project with 8 offices, a daycare center, 37 apartments and a courtyard. It was home to crime, vandalism, significant blight on nearly ¾ of an acre of land with 80% of the roof missing. Instead of reinstalling the roof, Mosaic created an open footprint inside the tall industrial walls allowing for the construction of bi-level apartments and making the project economics work in a creative way.
Edison Square included the demolition and development of a shuttered high school into a community shopping center anchored by a much-needed grocery store. The second phase of the Edison Square project, honors Edison High graduates who are veterans and war heroes by creating a 66-unit housing development for homeless and transitioning veterans seeking to re-establish their lives and seeking job opportunities at the Edison Square shopping center.
Gregory Reaves, the Managing Member of Mosaic Development, has spent more than 30 years working at all levels in corporate and private industries. He graduated from Howard University, Washington, DC, with a Bachelor of Science in Chemical Engineering. He also played Division I soccer in college. As a business professional, Gregory has acquired significant expertise in healthcare, commercial real estate development, government relations, domestic and international public and entrepreneurship. He is trained as a Fasttrac facilitator and has provided training to more than 200 entrepreneurs and businesses owners in New York and Delaware.
Leslie Smallwood-Lewis, co-founder and member of Mosaic Development, graduated from Brown University with a Bachelor of Science in Psychology. After graduating from Brown, Leslie attended Villanova University School of Law. She practiced law before joining the Goldenberg Group, a regional mid-sized real estate development firm, where she rose to Senior Vice-President of Development. There she led the development of a $50 million, 342,000 square foot shopping center in the Parkside area of West Philadelphia, the largest single development in a Federal Empowerment Zone in Pennsylvania. She also developed and implemented a program which led to the successful acquisition and relocation of private residents without incident, utilizing eminent domain to acquire vacant blighted properties and generated community support and positive media coverage for the effective management of this program.
Historically, Wayne Junction served as a very busy and prosperous business and residential area, drawing from North Philadelphia, Nicetown, Tioga, Logan and Germantown. In the late 19th and early 20th centuries, the convenience of the train station led to the development of industrial buildings surrounding the Property, allowing thousands of workers to commute throughout Philadelphia.
As manufacturing and light industrial waned, the Wayne Junction neighborhood suffered greatly from the loss of commerce. Large empty warehouses from Philadelphia's bygone industrial era stand over roads barren of pedestrian traffic, save for SEPTA commuters around the regional rail station.
SEPTA’s $31 million restoration of the regional rail station is serving as a catalyst for redevelopment of the Wayne Junction community. The station serves as a multi-modal transfer point between five of SEPTA's regional rail lines, one trackless trolley route, and two bus routes. The station serves over 190,500 riders annually. In addition to the active train hub, there is access to the highway via U.S. Route 1, which has an on-ramp less than a half-mile away.
Wayne Junction is on the cusp of revitalization. Local business owners, nonprofit organizations, and City of Philadelphia agencies are joining forces with private developers to reinvigorate this important transit hub with transit-oriented real estate development. With land within a 10-15-minute walk from the station, Wayne Junction is ideally suited to accommodate more intense land development.
Another local developer plans new mixed-use neighborhood projects surrounding the station providing restaurants, retail, office space, affordable housing, jobs, and a dog park for residents. Street lighting, trees, new sidewalks, landscaping, murals, and street-scaping are also part of his plan. His proposed projects are expected to total approximately 123,000 SF and $12+ million of investment.
Others involved in Wayne Junction revitalization projects include the nearby Wayne Mills Company, Nicetown CDC, Germantown United CDC, the Philadelphia Water Department, Mural Arts Program, the Philadelphia Department of Commerce and Fairmount Park Conservancy.
We are engaged in two simultaneous offerings of 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 (506(c)) offering.”
We plan to use the proceeds of the two offerings, with a maximum goal of $760,000, together with a loan from Fulton Bank and New Market Tax Credits equity to complete the Project.
Mosaic Development generally combines tax credits, grants and debt to support the development of their projects. Since the Project will utilize New Markets Tax Credits (“NMTC”) and take advantage of the newly enacted Opportunity Zones, the legal structure is complex. You can download a chart of the Project’s legal structure here. To provide for this structure, Mosaic Development created several entities. There are two companies that investors may invest in. Depending on investors’ personal finances, they may invest in the Reg CF offering and purchase limited liability company interests in Mosaic 4537 or invest in the Reg D (506(c)) offering and purchase limited partnership interests in Mosaic Opportunity Zone Fund, LP (“Mosaic OZF”) or invest in both offerings. The returns outlined in this offering requires an investment in the specific company. Throughout this offering, the use of Company refers to either Mosaic 4537 or Mosaic OZF, based on the context. We also refer to Mosaic 4537 and Mosaic OZF together, as the “Companies”..
It doesn’t matter how much is raised in the Reg CF offering and how much is raised in the Reg D (506(c)) offering. Thus, if we raise $1,000 in the Reg CF offering and at least $99,000 in the Reg D (506(c)) offering we will proceed, and vice versa.
In an offering under Reg CF the issuer is required to state a “Target Amount,” meaning the minimum amount the issuer will raise in the Reg CF offering to complete this 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 (506(c)) offering unless we have raised a total of at least $100,000 (minimum goal) by October 31, 2018. If we haven’t, both offerings and all investment commitments will be cancelled, and all committed funds will be returned.
While the Reg CF offering will close on the target date of October 31, 2018, the Reg D (506(c)) offering is planned to close in several rounds. Once the minimum offering goal of $100,000 has been met, we will conduct the first closing and funds committed to the Reg D (506(c)) offering will be released to Mosaic OZF. After that, all further money raised through the Reg D (506(c)) offering will be released to Mosaic OZF as it is committed.
The minimum investment in the Reg CF offering is $500, and the minimum investment in the Reg D (506(c)) offering is $5,000. Investments above $500 in the Reg CF offering may be made in $250 increments (e.g., $750, $1000 or $1,250, but not $1,136), while investments above $5,000 in the Reg D (506(c)) offering may be made in $2,500 increments. Investors can cancel their commitment up until 11:59 pm on October 28, 2018. After that, any funds raised will be released to the Companies and invested. The Companies may decide to change the Offering Deadline but will provide at least five days’ notice of such a change to all Investors. Investors will also be notified and asked to reconfirm their commitment if any other material changes are made to this offering.
The Project requires $1,100,000 in total equity. Mosaic Development has invested $40,000 and the Golaski Family has invested $300,000 on the terms outlined in this offering. As of the date of this offering, the Golaski Family owns the Property. Golaski Labs intends to purchase the Property from the Golaski Family when it finalizes the bank and New Markets Tax Credit financing on or before December 2018. The Golaski Family may be an investor in Golaski Labs. Therefore, they may own ownership interest in the Companies and Golaski Labs.
Each investor, including the Sponsor and the Golaski Family in their roles as investors, will receive an annual preferred return of 8.5% on their investment for a maximum of 10 years or until they reach a cap of a 3.2 multiple.The 8.5% preferred return will accumulate but not compound. All investors will also receive a 50% pro-rata share of any additional cash flow generated by the Project for a maximum of 10 years or until they reach a cap of a 3.2 multiple. Lastly, at the end of Year 7, investors will receive a 60% pro-rata share of any additional cash flow generated by a refinance or until they reach a cap of a 3.2 multiple. The project must be refinanced at Year 7 to be compliant with the New Market Tax Credit structure. (See “About Investor Return” for a description of the return of equity to Investors).
Mosaic Development plans to refinance or sell the Project at the end of seven years, which is the end of the NMTC tax compliance period, or at the end of ten years, which is the end of the compliance period for Opportunity Zones. (See “About Investor Return” for a description of the return of equity to Investors).
- Location proximate. Location is close to major transportation.
- Other investment. Other planned development & private investment in immediate area.
- Dense. Planned density expected to energize and activate the corner site.
- Creative design. Creative design and smart home technology to entice residents to the Project.
- Creative hub. A hub for socially conscious and creative thinkers.
The total amount anticipated to build the Project is approximately $7.2 million.
Along with the $760,000 raised through this offering, $40,000 invested by Mosaic Development and $300,000 by the Golaski Family, it is expected that approximately $2,300,000 in equity will be raised through New Market Tax Credits and Fulton Bank will provide a loan of approximately $3,852,000. The total development cost is derived by adding together all the projected costs as outlined in the list below. Hard costs are construction costs along with a contingency set aside for unforeseen circumstances. Soft costs include any bank fees and interest, insurance, engineering, architect and developer fees, and other such holding costs.
The table that follows shows anticipated sources and uses for the Project.
|New Market Tax Credits and grant||$2,308,200|
|Golaski Family capital contribution||$300,000|
|Sponsor capital contribution||$40,000|
|Small Change investors||$760,000|
|Total development costs||$7,259,585|
You can download a detailed operating budget here.
Several of Mosaic Development's prior projects have utilized NMTC financing. Mosaic Development, through its affiliated subsidiary entities, intends to use NMTC financing to develop the Project. The NMTC program is administered by the Community Development Financial Institutions Fund of the U.S. Treasury (“CDFI Fund”) and provides a 39% federal tax credit to investors who make qualified equity investments into a qualified community development entity (“CDE”), that in turn makes a loan or equity investment in an impoverished community. The tax credit is claimed over a seven-year credit allowance period. CDEs are privately managed investment institutions that are certified to make certain investments based on the CDFI Fund’s regulations. Each NMTC transaction has an investment fund to affect the financing arrangement.
This is how it will work: Mosaic’s affiliated entity will borrow funds from Fulton Bank and loan those funds to the investment fund. Then, U.S. Bank the sole investor in the NMTC transaction will invest its money in the investment fund. The investment fund then contributes the funds from the loan and U.S. Bank’s investment to a CDE – in this case the Philadelphia Industrial Development Corporation (“PIDC”). PIDC, will in turn, make loans to Golaski Labs to assist with financing the Project. Only U.S. Bank is entitled to substantially all of the tax credit benefits derived from the NMTC transaction. NMTCs are subject to 100% recapture for a period of seven years as provided in the Code. You can download a detailed description of how NMTCs work here.
As outlined in the LLC Agreement and LP Agreement, all distributions will be made in the following order of priority to Investor Members or Investor Partners based on their investment in either Mosaic 4537 or Mosaic OFZ, or both Companies, after bank loans have been repaid.
a) . First, the Available Cash shall be distributed to the Investor Members in Mosaic 4537 and Investor Partners in Mosaic OZF, including the Sponsor and Golaski Family, based on their respective investments in the Companies, until they have received their Preferred Return for the current year.
b) . Second, the balance of the Available Cash, if any, shall be distributed to the Investor Members in Mosaic 4537 and Investor Partners in Mosaic OZF, including the Sponsor and Golaski Family, based on their respective investments in the Companies, until they have received any shortfall in the Preferred Return for any prior year.
c) . Third, the balance of the Available Cash, if any, shall be distributed to the Investor Members in Mosaic 4537 and Investor Partners in Mosaic OZF, including the Sponsor and Golaski Family, based on their respective investments in the Companies, in their role as Investor Partners
- 50% to the Investor Members in Mosaic 4537 and Investor Partners in Mosaic OZF, including Sponsor in its role as Investor Partner; and
- 50% to Sponsor as a promoted interest.
until they have received a full return of their Unreturned Investment.
(d) . Fourth, the balance of the Available Cash, if any, shall be distributed:
- 60% to the Investor Members in Mosaic 4537 and Investor Partners in Mosaic OZF, including the Sponsor and Golaski Family, based on their respective investments in the Companies; and
- 40% to the Sponsor as a promoted interest.
All investor's returns are capped at a multiple of 3.2. In other words, an investment of $1,000 will return $3,200 invluding the original investment amount.
The table below illustrates our estimate of how much the full equity investment of $1,100,000 ($760,000 from Small Change investors, $40,000 from the Sponsor and $300,000 from the Golaski Family), is anticipated to receive in return if the Project were sold after seven years or 10 years of operations at the projected capitalization rates of 7.5%. The Project cannot be sold or refinanced before seven years as this is a requirement of NMTC Program. Anticipated net operating income is projected in the attached operating pro-forma.
|Anticipated return on $1,100,100 investment||At year 7 refinance||At year 10|
|Net operating income year 7||$614,784||$614,784|
|Sales price (capitalized value)||$8,197,120||$8,640.919|
|Less refnance fees or closing costs||($163,942)||($777,683)|
|Loan to value (75%)||$6,024,882|
|Less balance on loan||($2,892,676)||($5,554,558)|
|Preferred return (8.5%)||$654,500||$935,000|
|50% of cash flow||$473,682||$589,834|
|60% of net profit from sale or refinance||$1,879,324||$1,879,324|
|Total return to investors||$3,007,506||$3,404,158|
|Projected return on a $1,000 investment|
|Pro-rata share of preferred return||$596||$850|
|Pro-rata share of cash flow||$431||$536|
|Pro-rata share of net profit||$1,710||$1,710|
|Total return to investor||$2,737||$3,096|
|Projected return on a $25,000 investment|
|Pro-rata share of preferred return||$14,857||$21,225|
|Pro-rata share of cash flow||$10,753||$13,389|
|Pro-rata share of net profit||$42,661||$42,661|
|Total return to investor||$68,271||$77,275|
|Opportunity Zone benefit||Anticipated 15%||Anticipated 100%|
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 Risks of Investing.
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 Companies and the terms of this 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 this offering, nor does it pass upon the accuracy or completeness of any offering document or literature related to this offering. 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. You can download a more expansive list of potential risks here.
Unless otherwise noted, the videos and images on this 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 this offering and Investors will not receive an interest in any of them.