Contact Us
News

Mosaic Development Partners Kicks Off Project To Revive Long-Suffering Sharswood Neighborhood

A major step in development has just been taken in one of the most economically disadvantaged neighborhoods of Philadelphia.

Placeholder
A rendering of Sharswood Ridge, a mixed-use development that broke ground in October 2020 in the Sharswood neighborhood of Philadelphia.

On Wednesday, Mosaic Development Partners broke ground on a mixed-use development at 2077 Ridge Ave. in Sharswood, a neighborhood just north of Brewerytown that the Philadelphia Housing Authority is targeting with a program called the Sharswood/Blumberg Choice Neighborhood Initiative. The development, named Sharswood Ridge, is planned to total 234K SF and contain 98 apartments, 200 parking spaces and more than 45K SF of retail.

The Ridge Avenue commercial corridor is the first area of focus for the PHA program, referred to as a "transformation program" by officials in a press release for the groundbreaking. The $52M complex will be funded by a combination of city loans, tax credits and social impact investors. Shift Capital is partnering with Mosaic for the development.

Of the apartment units, 46% are committed to below market-rate housing, of which 17 will be filled with Project Based Vouchers from PHA. The mix of retail was curated to meet the basic commercial needs of any neighborhood seeking growth: a grocery store (discount chain Grocery Outlet), a bank (a branch of Santander Bank), healthcare (an Everest Urgent Care outpost) and food service (a Wingstop restaurant).

The Grocery Outlet and Everest Urgent Care will take up the ground floor of the parking garage, while the remaining retail uses will go beneath two four-story apartment buildings, with 66 units between them separated by a wooded plaza. The remaining residential units will go in a three-story, townhouse-style arrangement. 

Sharswood's need for economic revival is well-documented, with 52% of residents living below the poverty line, an 80% unemployment rate and over 1,300 vacant parcels, including what used to be the neighborhood's public school, according to PHA. That informed even how the apartments not designated as affordable are priced.

“It’s what we think is what the community can afford in that neighborhood, not what market rate is for Philadelphia. It’s not based necessarily on formulas, though we do look at 80% [area median income] for our low-affordable market rate," Mosaic co-founder and principal Greg Reaves told Bisnow. "So we keep a certain portion of rents between 80-100% AMI, and everything above 100% is what we call market-rate, rather than being the highest rent we could possibly get.”

The city of Philadelphia took at least 1,200 parcels in Sharswood into its possession through eminent domain, after no development activity had taken place since "at least the 1960s," Reaves said. When Germantown began showing signs of gentrification, PHA moved to secure long-term projects to build community wealth before the private market could price neighbors out.

The first step in the transformation plan was the construction of a new headquarters for PHA at 2013 Ridge Ave., which consolidated several offices from around the city and was completed in 2018. The city put out a request for proposals to develop the neighboring lot in 2017, a process that awarded development rights to Mosaic through a long-term ground lease deal.

Placeholder
A rendering of the three-story townhouse portion of Mosaic Development Partners' Sharswood Ridge development.

Mosaic then invited Shift in as a development partner before looking to put together the project's financing, which Reaves called "probably one of the most complicated projects financially that we’ve been involved with."

The largest financing chunk of what Shift Capital CEO Brian Murray called "a national model for creative public-private partnerships" for the $52M project comes from a $25M amortizing loan from the PHA. The rest of the capital stack comes from a variety of sources:

  • $11M in private equity investments.
  • $8M in private equity through the purchase of New Market Tax Credits.
  • $2.4M in grants from the state of Pennsylvania's Redevelopment Assistance Capital Program.
  • A $2.4M loan from Philadelphia Industrial Development Corp.
  • $2.2M in equity invested by Mosaic and Shift.
  • An unspecified traditional loan from Fulton Bank.

Since Sharswood is a Qualified Opportunity Zone, the private equity portion includes $1.3M from Woodforest-CEI Boulos Opportunity Fund, a $20M joint venture between Woodforest Bank and CEI Boulos Capital Management. HBSE Real Estate, the new real estate arm of Harris Blitzer Sports & Entertainment, also joined as a private equity partner.

HBSE, the entity that owns the Philadelphia 76ers, had brought in Mosaic as a Black-owned business partner to boost the diversity credentials of its proposal to build a new arena for the Sixers at Penn's Landing this year. The HBSE proposal lost out to one from The Durst Organization, but the relationship between HBSE and Mosaic still bore fruit in the form of Sharswood Ridge. Mosaic was also named as PIDC's next development partner at the Philadelphia Navy Yard earlier this year.

Among the entities that purchased New Market Tax Credits are Capital One Bank and an affiliate of the Pennsylvania Housing Finance Agency named Commonwealth Cornerstone Group.

Mosaic estimates the project will generate 200 construction jobs and 200 permanent jobs, with a heavy emphasis on minority- and women-owned businesses that goes beyond what the city requires for projects with public assistance.

"Whether in civil engineering, legal services, architects and construction, we insist on including women and people of color," Reaves said. "And a bit too much focus goes to the construction industry, even when architecture and legal services have even less representation, to say nothing of the investment system."

To make some progress toward Reaves' final point, part of the private equity portion of the capital stack came from a crowdsourcing investment program called Small Change, in which local residents can invest with a $500 minimum and no accreditation required. Though it didn't wind up generating a large percentage of the equity needed, Reaves believes the effect could be profound.

"Communities of color and local communities are rarely included in a commercial development’s capital stack," Reaves said. "When we’re investing in neighborhoods, those communities have the opportunity to give permission, but they never have the opportunity to invest in it."