Master of Real Estate Development (MRED) Capstone

Cassandra Aaryn Huntington

Capstone submitted to the Faculty of the Graduate School of the University of Maryland, College Park, in partial fulfillment of the requirements for the degree of Master of Real Estate Development 2019

Advisory Committee: Jessica Jones, Mentor Maria Day-Marshall, MRED Director Tanya Bansal, MRED Assistant Director i

Table of Contents Table of Contents .......................................................................................................... ii List of Figures .............................................................................................................. iv - Project Introduction and General Context ................................................. 1 Introduction ............................................................................................................... 1 Site Location and History ..................................................................................... 1 Site Context........................................................................................................... 3 Existing Site Conditions ....................................................................................... 7 Demographic Analysis .............................................................................................. 8 Philadelphia Overview .......................................................................................... 8 Census Tract 22..................................................................................................... 9 Point Breeze Neighborhood ................................................................................ 11 Homeless Adolescents ........................................................................................ 12 Economic/Market Conditions ................................................................................. 13 Property ............................................................................................................... 13 Employment / Job Outlook ................................................................................. 14 - Market Analysis and Proposed Project .................................................... 16 Market/Submarket Report Summary ...................................................................... 16 Multi-Family Market Conditions ........................................................................ 16 Industrial and Retail Market Conditions ............................................................. 17 Overall Market Conclusions and Application..................................................... 19 Market Comparables Analysis ................................................................................ 20 Recent Developments/Comps ............................................................................. 20 Comparable Non-Residential Uses ..................................................................... 23 Upcoming Developments.................................................................................... 24 Proposed Project Uses and Rents ............................................................................ 27 –Project Design and Social/Environmental Impacts .................................. 28 Project Design ......................................................................................................... 28 Program Overview .............................................................................................. 28 Project Amenities ................................................................................................ 30 Massing and Structure......................................................................................... 30 Parking Accommodations ................................................................................... 32 Public Realm ....................................................................................................... 32 Unit Types and Tenant Mix ................................................................................ 34 Social Impact .......................................................................................................... 37 Community Needs and Project Vision................................................................ 37 Overall Community Benefits .............................................................................. 37 Sustainability........................................................................................................... 40 Leadership in Energy and Environmental Design (LEED) ................................ 40 Planted Cool Roofs ............................................................................................. 41 - Regulatory Context and Approval Process .............................................. 42 Local Government .................................................................................................. 42 Philadelphia Planning Department ..................................................................... 42 Political Influence ............................................................................................... 43 ii

Approvals Process................................................................................................... 45 Zoning Permit ..................................................................................................... 45 Building Permit ................................................................................................... 47 Zoning Regulations ................................................................................................. 48 Industrial-Residential Mixed-Use ....................................................................... 48 Overlay Zone ...................................................................................................... 48 – Construction and Development Timeline ............................................... 49 Project Construction................................................................................................ 49 Construction Type ............................................................................................... 49 Project Hard Costs .............................................................................................. 49 Notable Construction Logistics........................................................................... 50 Development Timeline............................................................................................ 51 - Marketing and Management .................................................................... 53 Marketing Plan ........................................................................................................ 53 Target Audience and Project Vision ................................................................... 53 The Four Ps of Marketing ................................................................................... 54 Management Structure ............................................................................................ 59 - Project Funding and Financial Analysis ................................................. 60 Social Enterprise Development Feasibility............................................................. 60 Development Cost Overview .................................................................................. 61 Funding Sources...................................................................................................... 62 Hard Debt ............................................................................................................ 62 Low-Income Housing Tax Credits...................................................................... 63 Federal, State, and City Grant Programs ............................................................ 64 Fundraising / Donation ....................................................................................... 65 Financial Analysis................................................................................................... 66 Equity Investment ............................................................................................... 66 Cash Flow ........................................................................................................... 66 Reversion Valuation and Profits ......................................................................... 67 Sensitivity Analysis ............................................................................................ 68 Bibliography ............................................................................................................... 68

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List of Figures Figure 1.1 Google Earth Site Map ........................................................................................................... 1 Figure 1.2 Historical 1910 Sanborn Map, Washington Ave.................................................................... 2 Figure 1.3 Public Transit / Site Access ................................................................................................... 3 Figure 1.4 Site Context / Adjacent Uses.................................................................................................. 4 Figure 1.5 Washington Avenue Corridor Pedestrian Experience ............................................................ 5 Figure 1.6 Neighborhood Comparison .................................................................................................... 6 Figure 1.7 Reported Annual Crime ......................................................................................................... 7 Figure 1.8 Existing Conditions Site Map ................................................................................................ 8 Figure 1.9 Marital Status ......................................................................................................................... 9 Figure 1.10 Employment Status by Race .............................................................................................. 10 Figure 1.11 Income by Race.................................................................................................................. 10 Figure 1.13 Education by Race ............................................................................................................. 10 Figure 1.12 Marital Status by Race ....................................................................................................... 10 Figure 1.14 Educational Attainment...................................................................................................... 11 Figure 1.15 Commuting to Work .......................................................................................................... 11 Figure 1.16 Family Household Types ................................................................................................... 11 Figure 1.17 Homeless Adolescent Infographic (Source: Author) ......................................................... 12 Figure 1.18 Home Values in Philadelphia ............................................................................................. 13 Figure 1.19 Major Job Destinations for South District Residents ......................................................... 14 Figure 1.20 Largest Employers in South District .................................................................................. 14 Figure 1.21 Industry vs. Occupation ..................................................................................................... 15 Figure 2.1 Average Effective Rents in South Philadelphia Submarket ................................................. 17 Figure 2.2 Market Analysis Development Map (Source: Author) ........................................................ 20 Figure 3.1 Project Rendering................................................................................................................. 28 Figure 3.2 Exploded Axon, Building Program ...................................................................................... 29 Figure 3.3 Second Floor Plan ................................................................................................................ 29 Figure 3.4 Typical Residential Floor Plan ............................................................................................. 29 Figure 3.5 Building Axon ...................................................................................................................... 30 Figure 3.6 Project Rendering: Washington Ave. Street Entry ............................................................... 33 Figure 3.7 Typical Residential Floor Plan ............................................................................................. 34 Figure 3.8 Project Rendering: Mixed-Income Balcony (Source: Author) ............................................. 35 Figure 3.9 Project Rendering: Group Home Porch (Source: Author) ................................................... 35 Figure 3.10 Homeless Adolescent Integration (Source: Author) .......................................................... 36 Figure 3.11 Project Rendering: Warehouse Mezzanine ........................................................................ 38 Figure 3.12 Healthcare Facility Plan and Renderings ........................................................................... 39 Figure 3.13 Project Rendering: Washington Ave. View (Source: Author) ........................................... 39 Figure 4.1 Permit Process (Source: PhiladelphiaZoning.com) .............................................................. 46 Figure 5.1 Per Square Foot Construction Hard Costs............................................................................ 50 Figure 5.2 Development Timeline Critical Path .................................................................................... 51 Figure 6.1 Project Rendering: Housing + Healing Garden.................................................................... 56 Figure 6.2 Project Rendering: Healthcare Facility Healing Garden ...................................................... 56 Figure 7.1 Social Enterprise Development, Shared Value .................................................................... 60 Figure 7.2 Sources and Uses Charts ...................................................................................................... 61 Figure 7.3 Sources and Uses Summary ................................................................................................. 62 Figure 7.4 Mortgage Terms (Source: Author) ....................................................................................... 62 Figure 7.5 LIHTC Calculation .............................................................................................................. 63 Figure 7.6 Projected 15-Year Cash Flow (Source: Author) .................................................................. 66 Figure 7.7 Valuation and Financial Ratios ............................................................................................ 67 Figure 7.8 Sensitivity Analysis ............................................................................................................. 68

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- Project Introduction and General Context Introduction This capstone project will explore a social entrepreneurship model for community development. The site is located at the 1600 block of Washington Avenue in the low-income neighborhood of Point Breeze in South Philadelphia. The project will address the needs of the community through mixed income/affordable housing, employment training, and healthcare. The project also includes unique services and transitional housing for homeless adolescents, an extremely underserved population.

Site Location and History

Figure 1.1 Google Earth Site Map (Source: Author)

Washington Avenue is an important commercial corridor in the South District of Philadelphia, creating the northern edge of Point Breeze. The parcels along the corridor have historically been used for industrial purposes such as manufacturing 1

and material storage, aided by the rail line that historically ran along Washington Avenue. The rail line has since been removed; however, the corridor continues to primarily serve industrial purposes.

Figure 1.2 Historical 1910 Sanborn Map, Washington Ave. (Source: OpenMaps.phila.gov)

In recent years, Philadelphia has begun to see growth and revitalization in the neighborhoods to the north and south of Center City, causing the nature of Washington Avenue to begin to shift. This commercial avenue is now seen as a potential mixed-use corridor that can bring more housing, jobs, and foot traffic to the area. The planned capstone project plans to be at the forefront of these redevelopment efforts, being a good model for equitable development for the community.

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Site Context The 1600 block of Washington Avenue is well-situated for a mixed-use project due to its location on the primary commercial corridor in the South District. It is only two blocks west of Broad Street, the major north/south street running through Philadelphia. Proximity to Broad Street is notable because it is one of the two major cross-axes that Philadelphia was planned along. It is a major commercial corridor and the Septa train line runs along Broad Street, connecting the South District to Center City. The site is also well serviced by three bus lines that ensure the site is wellconnected in all directions.

Figure 1.3 Public Transit / Site Access (Source: Author)

Although most of the built environment is composed of residential uses in the Point Breeze neighborhood (south of Washington Avenue) and the Graduate Hospital

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Figure 1.4 Site Context / Adjacent Uses (Source: Author)

neighborhood (north of Washington Avenue), there are a variety of uses and services along the Washington Avenue commercial corridor. The buildings shown are walking distance from the site, and some of these uses are recent additions to the neighborhood. Continued development is planning for Washington Avenue, bringing even more people, activities, entertainment, and services to the area in the near future.

The existing surrounding uses are as follows: (within ½ mile radius) •

Single-Family Rowhomes: Many of these rowhomes are historic Philadelphia rowhomes built in the 19th and 20th centuries. The homes are typically one to two stories tall and constructed with red brick. Newer townhomes have been added to the neighborhoods often using modern materials such as fiber cement, metal panels, and vinyl siding.

•

Education / Specialty Schools: highly rated High School for Creative & Performing Arts, the renowned Rock School for Dance Education, Little Shepherds Christian Learning Center (pre-school/day care), Lincoln Day Educational Center (day care), the Aspen Grove School (pre-school), Stanton Edwin M School (Philadelphia city school district PK-8) 4

•

Food / Drink / Restaurant: Chipotle, Insomnia Cookies, Vietnamese Market, Boot & Saddle, Broad Street Diner, Dunkin Donuts, McDonalds, Chick’s, Breeze Point Café, Scotty’s Bar, Melino’s Hoagies, Crown Fried Chicken, Martabak Ok, Bagin’ Curry Franklin

•

Services / Retail: Target, CVS, PetSmart, Sprouts Grocer, YMCA, Save a Lot, Fitness/Gyms, Family Dollar, Laundromat, Beauty Town, Cycle Thrift

•

Office / Business: Allstate Insurance, TeleStar Wireless, OCF Realty, Department of Human Services South District Office

•

Industrial: Several autobody shops, Construction Mall Corporation, YR Supply Tile & Vanity, Marble Works, multiple appliance stores, C& R Building Supply, Sherwin-Williams Commercial Paint Store, Falcone’s Carpet, Qualitys Home Center, Ferguson Plumbing Supply, A& A International Trading (wholesale food store), Smart Choice Kitchen & Bath Design, YD Hardwood Floors USA, Billows Electrical Supply, Roma Aluminum Company, Inc.

•

Chew Playground: 2.8-acre public, city park one block offers a recreation center, athletic fields, green play area, and a swimming pool

Figure 1.5 Washington Avenue Corridor Pedestrian Experience (Source: Author)

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The Washington Avenue Corridor is extremely wide and has no street trees.

Currently, the corridor feels somewhat uninviting for pedestrians because of its width, lack of human-scale elements (such as street furniture), lack of small shops/restaurants, and monotonous, uninviting facades. The character of the street is still quite industrial and vehicular-focused. The abutting neighborhoods greatly contrast this texture with fine-grained residential blocks with many old rowhomes and small streets.

When walking around the neighborhoods to the north and south of Washington Avenue it quickly becomes apparent that there is an income disparity

Figure 1.6 Neighborhood Comparison (Source: Author)

and a difference in public investment. The Graduate Hospital neighborhood, located to the north clearly has better maintained homes, nicer shops/storefronts, street trees, and better public infrastructure. The Point Breeze neighborhood to the south has vacant homes, homes in poor condition, boarded up windows, very little street trees, and poorly maintained roads.

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Important issues like school and crime ratings are not favorable for Point Breeze, Philadelphia. Schools are rated poorly, with the high school graduation rate 10% lower than Pennsylvania. Total crime in the neighborhood is 3,862 per 1000K people, 41% higher than the national average (2,745 per 100K), but lower than the Philadelphia average (4,011 per 100K). There is a 1 in 26 change of being a victim, however the crime has decreased by 4% in the last year. Most crimes that occur near the site are robberies, burglaries, and thefts. There are some violent crimes, but they do not occur on the corridor, but instead deeper into the neighborhood.

Existing Site Conditions The site is almost a full city block, but it does not include the several small parcels with rowhomes on the southern edge. The site is 90,850 square feet total, approximately two acres. There is 67,916 square feet of built area touching the ground. Most of the structures are old warehouses used for building material storage.

The taller building on the northeast corner of the site is used as a multistory appliance store. The majority of the buildings will be demolished

Reported Annual Crime 5000 4000 3000 2000 1000 0

to accomplish the planned project,

total crime Point Breeze

but there is one warehouse that is

violent crime property crime Philadelphia

National

Figure 1.7 Reported Annual Crime (Source: US Census)

being considered for adaptive reuse.

The site previously housed the American Ice Company and the Republic Steel Corporation. These buildings were not large-enough scale to be used for factory 7

purposes, so it is believed that there would not have been significant environmental contamination from these previous uses. Environment remediation is not expected; however, a phase 1 and 2 environmental site assessment will be conducted to confirm. The site is currently owned by “1600 Washington Avenue L.” The company had the lot lines changed to create one lot instead of two. The site is currently being used as an appliance store housed in the newer building on the corner, while the others structures on the site are vacant and used for material storage.

Figure 1.8 Existing Conditions Site Map (Source: Author)

Demographic Analysis Philadelphia Overview Philadelphia has an overall population of 1,584,138 with 53% females and 47% males. The median age is 34.1 and only 15.8% have a bachelor’s degree or higher. Philadelphia is primarily split between White (41%) and Black (43%) residents, with Asian (8%) and Hispanic/Latino (12%) residents being the minority.

Philadelphia has an unemployment rate of 11.3%, and 33% of unemployed residents do not have health insurance (public or private).

Philadelphia has high poverty rate of 26% and the median household income is $40,649. Owner occupied household median income ($53,869) is much high than

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renter occupied household median income ($28,579). Philadelphia is split fairly evenly between the owner/renter populations (52% own, 48% rent).

Census Tract 22

Marital Status

The site is in census tract 22 which is

married 21%

divorced

bordered on the north by Washington Avenue and on the east by Broad Street. This tract has a population of 2,385 with 1,063 households (2.16 average size) and 380 families (3.3 average

60%

3%

widowed

10%

separated

6%

never married

Figure 1.9 Marital Status (Source: US Census)

size). The median age of residents is 31, 3 years younger than the median age of all Philadelphians. The poverty level is extremely high for children (77% of which are living with single parents) in this census tract with 49% living below the poverty level, while those ages 18 to 64 have 18% living below the poverty level. 30% of households are making less than $30,000 and a staggering 16% of households are bringing in less than $10,000. Most residents have one car (45%) and many residents either don’t have a car (29%) or have two cars (18%).

One of the most important things to note about the demographics of this area is the extreme divergence between the White and Black population, who make up much of this census tract, equally represented at 45% each. (there are not many residents of other races in this area, including Asian and Hispanic):

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Income by Race

Employment by Race $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0

100% 80% 60% 40% 20% 0%

employed White

unemployed Black

White

Figure 1.10 Employment Status by Race (Source: US Census)

120% 100% 80% 60% 40% 20% 0%

25% 20% 15% 10% 5%

White

Black

Education by Race

30%

married

household median income

Figure 1.11 Income by Race (Source: US Census)

Marital Status by Race

0%

per capita median income

high school grad

divorced White

Black

bachelors degree or higher Black

Figure 1.12 Education by Race (Source: US Census)

Figure 1.13 Marital Status by Race (Source: US Census)

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It is also important to note the educational attainment of the residents, which is much higher than overall Philadelphia at the college level. It is also interesting to note the methods by which Philadelphians travel to work in comparison to this area:

Commuting to Work

Educational Attainment 60% 50% 40% 30% 20% 10% 0%

60% 50% 40% 30% 20% 10% 0%

non-high high-school some bachelors or school grad grad college or higher associates Philadelphia

drive car carpool public (alone) transit Philadelphia

Tract 22

Figure 1.14 Educational Attainment (Source: US Census)

walk

bike

Tract 22

Figure 1.15 Commuting to Work (Source: US Census)

Point Breeze Neighborhood Although Census Tract 22 is one of the four tracts that make up the Point Breeze neighborhood, the demographics of this tract are in better condition than the overall neighborhood. This is because it is the northeast corner of the neighborhood which is closer to Center City and along Broad Street. It is harder to find specific data for Point Breeze as a neighborhood because of the way the census tracts and zip codes are

Family Household Types 80% 60% 40% 20% 0%

Philadelphia

Tract 22

divided, but research shows that the

married

entire Point Breeze community has

Figure 1.16 Family Household Types (Source: US Census)

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single mom

Point Breeze single dad

a higher Black resident population (70%), lower income and education levels, lower property values, and higher unemployment. Another very important aspect to note is the extremely high percentage of single mother households in the Census Tract 22 and Point Breeze overall.

Homeless Adolescents 1600 Nexus is incorporating a unique, high-risk population in its target population as a part of the overall mission behind this project which is to contribute to breaking cycles of poverty and social injustice. This project uses a social enterprise development approach to create both economic and social benefit which is called the shared value. The homeless adolescent user group is often overlooked and does not have many resourced dedicated to them, but this project will address the complex needs of this vulnerable population.

Figure 1.17 Homeless Adolescent Infographic (Source: Author)

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Economic/Market Conditions Property Philadelphia has a total of 679,876 housing units, with an overall vacancy rate of 13% and median property value of $166,200. The homeowner vacancy rate is much lower at 2.3% and the rental vacancy rate is 7.1%. The majority of built structures are traditional Philadelphia rowhomes at 59% and multi-family buildings with 20 units or more make up 12% of the city’s building stock. Philadelphia architecture is rich with culture and history with 41% of the built environment built before 1939. In comparison, Census Tract 22 has a higher population of renters to owners at 59% to 41% and a higher median property value of $239,400.

Home Values in Philadelphia 25% 20% 15% 10% 5% 0%

$50K-100K

$100K-150K $150K-200K $200K-300K $300K-500K

Figure 1.18 Home Values in Philadelphia (Source: US Census)

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Employment / Job Outlook The South District consists of 4 square miles, 133,000 residents, and 28,000 jobs (employment has grown by 6% in the last decade).

The majority of employed residents work within the city’s boundaries (69%) and 11% actually work within the District itself, with the two largest employers being in the education and healthcare industries.

Figure 1.19 Major Job Destinations for South District Residents (Source: Philadelphia City Planning Commission)

More specifically, the major industries in Census Tract 22 are health care/ social assistance (20%), accommodation and food services (11%), education (10%), professional/ scientific/ technical services (11%), admin/ support / waste management/ remediation services (8%), retail (7%), finance/ insurance (5%), public Figure 1.20 Largest Employers in South District (Source: Philadelphia City Planning Commission)

admin (5%), manufacturing (4%).

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Similarly, the main occupations of residents in Census Tract 22 are education/ healthcare/ social assistance (25%), profession/ scientific/ technical services (19%), retail (17), arts/ entertainment/ recreation/ accommodation/ food services (10%), finance/ insurance/ real estate (7%), public admin (5%).

Industry vs. Occupation manufacturing waste / remediation public admin finance / insurance retail professional services hospitality / food health / education 0%

5%

10%

15%

Occupation

20%

Industry

Figure 1.21 Industry vs. Occupation (Source: US Census)

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25%

30%

35%

- Market Analysis and Proposed Project Market/Submarket Report Summary Multi-Family Market Conditions Philadelphia’s multi-family rental market has been growing rapidly in the past five years and continues to see growth. The current average vacancy rate is low at 5% with 5,074 units delivered and 6,817 units absorbed in the last 12 months. However, there is a projected increase in apartment vacancy rates (up to 6.5% in 2023) and slowdown in absorption due to the high volume of new apartments nearing construction in 2021, in addition to the large number of millennials ageing out of their prime renting years. The asking rent growth has been higher than in the past at 3.6% growth.

One especially important finding from the CoStar report that is directly relevant to this project is the increased competition among lower- and middle-income renters for a limited supply of affordable units. This circumstance has given landlord of 3-star properties the upper hand and higher growth rates are seen in this area in comparison to 4 and 5-star properties. These 3-star properties have lower vacancy rates at 5% versus luxury apartments (4 and 5 star) have much higher vacancy rates between 10-20% due to certain submarkets experiencing abundant new construction, creating intense competition for tenants between high-end properties. High-rise projects in Center City have even stalled because of the rising construction costs for high rise structures, so many developers have decided to pursue mid-rise projects in surrounding neighborhoods. This high labor cost in the Philadelphia market is really 16

hurting development because there is not a comparably high payback in rents unlike in places like New York City, Boston, and Los Angeles. The sale trends in the Philadelphia market have a cap rate ranging between 5%-7% with an average market sale price/unit of $160,000. Unit types with the highest vacancy rates are studios, followed by 3 bedrooms.

The South Philadelphia submarket has an inventory of 3,918 units, which is 1.3% of the overall Philadelphia market. The submarket experienced 1.4% population growth, with most of the increase seen in new residents aged 40 or more. South Philadelphia saw 67 units delivered in the last 12 months, which is 1.7% of their inventory. There are currently 396 units under construction, comprising 10% of their inventory. The overall average effective rent is $1,665/unit and $2.07/SF, while the 35-star property average rent is $1,730. The effective year rent growth was 2.2% and the submarket experienced concessions of 1.1%. The vacancy rate averaged 6.2% (7.5% for 3-5-star properties) with 245 totals units unoccupied and 293 units (7.6% of inventory) absorbed in the last 12 months, primarily in the 3-5-star category. Cap rates in the submarket are healthy at 5.8% for the submarket.

Studio $1,480

1 Bed $1,524

2 Bed $1,988

3 Bed $3,293

Average $1,730

Figure 2.1 Average Effective Rents in South Philadelphia Submarket (Source: CoStar)

Industrial and Retail Market Conditions Although the proposed project will have a significant portion of the program focused on mixed-income housing, the project also includes light industrial uses, small-scale retail, and healthcare space.

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The industrial market in Philadelphia is quite strong with 5.4M SF delivered in the past 12 months, 3.9M SF absorbed, 4.9% vacancy, and 5.2% rent growth. The primary reason for the slower absorption is due to Amazon’s shifting focus from large regional distribution centers to smaller infill location in the suburbs as well as the lack of desirable vacant space left for tenants to grow into. There is a strong investor interest in assets with 4.5% cap rates, but the overall average cap rate is a bit higher than this at 7.3%.

The retail market in Philadelphia, like most retail markets, has been struggling due to the rise in e-commerce. Philadelphia experienced 1.2M SF of new retail in the last 12 months with -566K SF absorbed. The vacancy rate is at 4.7% with 1% rent growth in the last 12 months. Philadelphia’s low unemployment rate and rising wages continue to support healthy spending which is positive for the retail market. More space has recently been leased to larger grocers, experience-oriented retailers/entertainment venues, and fitness centers. Mixed-use developments have successfully been increasing foot traffic in many newer developing areas. The average rent PSF is $18-20 and the average cap rate is 7.1%.

The South Philadelphia submarket captures 4.1% of Philadelphia’s overall market with 13,535,000 SF of retail inventory. The submarket had 15,000 SF delivered in the last 12 months with 33,253 SF absorbed, and nothing currently under construction. The average rents in South Philadelphia are $20.55 with a low average vacancy rate of 2.1%.

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Overall Market Conclusions and Application Based on the upcoming CoStar prediction of reduced absorption and increased vacancies, the planned mixed-income and affordable project would appeal to a wider range of households, helping offset this risk. The fact that the affordable projects are currently (and typically) in high demand is another good sign for the project. The findings concerning high labor costs also reinforces the planned projects mid-rise nature which will not experience such drastic construction costs increases.

The South Philadelphia multifamily market is currently experiencing growth with a large volume of residential units currently under construction, most of which are market rate. This shows promise for a revitalizing neighborhood, but also shows a need for more affordable housing in a low-income area to reduce displacement of current residents. The retail conditions in the submarket are relatively healthy with high retail absorption, reasonable rents, proportionately high capture rate, and very low vacancy rates. It is also encouraging that the industrial market in Philadelphia is strong with significant investor interest. This is important to consider due to the lightindustrial uses planned for the site.

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Market Comparables Analysis

Figure 2.2 Market Analysis Development Map (Source: Author)

Recent Developments/Comps 1. LINCOLN SQUARE [residential, mixed-use] Project Details: Located at 2501 Washington Ave at the intersection with S. Broad Street, developed by Kimco Realty, delivered in 2018, nine stories, 300,000 SF, 322 units, 4-star property/class A ($100M), 415 parking spaces in four-story garage, 26% vacancy, $91.48/Unit annual taxes (2015), 4 elevators, 3.4% concession Retail on Site: Starbucks, Target, PetSmart, Sprouts Organic Grocery, CVS Pharmacy, Fine Wine & Spirits, Chase Bank, Chipotle, Insomnia Cookies Resident Amenities/Unit Features: Building amenities include bicycle storage, conference rooms, fitness center, game room, grills, media center/movie theater, package service, pet care, pet play area, and roof terrace. Units feature quartz countertops, stainless steel appliances, and balconies Unit Type Studio 1 Bed 2 Bed 3 Bed Totals/Ave.

# Units/Mix 70 (22%) 129 (40%) 73 (23%) 47 (15%) 319

Average Size 435 SF 655 SF 1,007 SF 1,356 SF 790 20

Price/Unit $1,652 $2,058 $2,919 $3,755 $2,416

Price/SF $3.80 $3.14 $2.90 $2.77 $3.06

2. 1200 WASHINGTON AVE. [residential] Project Details: Located east of S. Broad Street, prefabricated apartment building delivered in 2017, five stories, 37,418 SF, 48 units, 10.2% vacancy, 1% concession, 2,227 SF retail space, 12 parking spaces (2 for retail) in parking garage, class B, $99.46/unit annual taxes, 3.44 FAR Resident Amenities/Unit Features: Lobby with beverage station, lounge area with billiards and TV with surround sound, glass doors open to furnished outdoor patio with gas grill, fire pit, and project screen. Building also includes bicycle racks, trash chute, and climate-controlled hallways. Units feature highend kitchens, stone countertops, stainless steel appliances, modern baths, washer/dryer, and large closets.

Sale Info: The project is currently for sale (on market for 3 months) for $12,500,000 ($260,416/unit) at a 6.00% cap rate and NOI of 750,000.

Unit Type Studio 1 Bed 2 Bed Totals/Ave.

# Units/Mix 4 (8.3%) 28 (58.3%) 16 (33.3%) 48

Ave. Size 450 SF 615 SF 830 SF 673 SF

Price/Unit $1,620 $1,737 $2,466 $1,949

Price/SF $3.60 $2.82 $2.97 $2.90

3. THE BREEZE BUILDING [residential] Project Details: Located at 1501 S 17th Street in the Point Breeze neighborhood, was previously a school, renovated 2018, 4-star property/classA, four stories, 62,050 SF, 84 units – 10 affordable, 50 surface lot spaces, units individually metered, $1,466.40/unit in taxes (2014), 3.6% vacancy, 0.9% concession Resident Amenities/Unit Feature: Unique units in renovated old school building feature modern boutique look within old Philadelphia architecture, tall ceilings and windows. Building amenities include roof deck, courtyard, gym, laundry room on each level and community room, controlled access, and parking available ($100). Units feature stainless steel appliances, granite countertops, hardwood floors, exposed ductwork with 12-16 foot ceilings, recessed lighting, central air and heat, washer/dryer, and pet friendly.

Unit Type Studio 1 Bed 2 Bed Totals/Ave.

# Units/Mix 33 (39%) 34 (41%) 17 (20%) 84

Ave. Size 484 SF 733 SF 1,032 SF 696 SF 21

Price/Unit $1,068 $1,425 $1,825 $1,366

Price/SF $2.21 $1.94 $1.77 $1.96

4. THE ARMORY LOFTS [residential] Project Details: Located at 1221-1231 S Broad Street, built in 2016, 3-Star property/class-B, steel construction, 0.75 acres, six stories, 99,999 SF, 50 units, improvements to land - $203,940/unit, 0% vacancy, 0.2 concession Resident Amenities/Unit Feature: Building amities include roof deck, local gym discount, on-site café, covered parking, keyless entry, security cameras, and views of center city. Units are very large— all having at least 2 bathrooms and some units have 2.5 baths, central air, stainless steel appliances, walk-in closets, large windows, and balconies.

Unit Type 1 BD + Den 2 Bed Totals/Ave.

# Units/Mix 5 (10%) 45 (90%) 50

Ave. Size 1.300 SF 1,210 SF 1,219 SF

Price/Unit $1,961 $2,201 $2,177

Price/SF $1.51 $1.82 $1.79

5. CHOP PRIMARY CARE [healthcare] Project Description: Located at 1700 S Broad Street is South Philadelphia’s new Community Health and Literacy Center built in 2016 by the Children’s Hospital of Philadelphia (CHOP). The building is three-stories with a total of 96,000 SF and is LEED-certified. This project was a public-private partnership with the City, and also collaborated with the community through several neighborhood meetings.

Program: This facility is first of its kind housing pediatric primary care (22,000 SF) plus a Philadelphia Health Center 2 (29,500 SF) provided through the Philadelphia Department of Public Health. The Philadelphia Free library also has a branch in the facility (12,000 SF) as well as the DiSelvestro Recreation Center.

Financing: To finance this project the City provided a ground lease at minimal cost and 2.2M towards the construction. CHOP contributed $30M in operating revenue, the library provided $1.3M and $9.8M of equity was provided through New Market Tax Credits.

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6. PASEO VERDE SOUTH [residential, LIHTC] Project Details: Located at 1950 N 9th Street in the North Philadelphia East Submarket (not in same submarket, but used as comp because it is a lowincome housing tax credit project), built in 2013, 4-star property/class-A, four stories, 120 units – 53 affordable, 206,000 SF, 67 surface parking spaces and 50 covered space (1.0 parking ratio), $438.13/Unit annual taxes (2019), 0.3% concession, 1.90 Acres, 2.49 FAR, steel construction, 4 elevators, 0% vacancy Resident Amenities/Unit Features: Building amenities include a business center, controlled access, courtyard, fitness center, laundry facilities, resident lounge, package service, property manager and maintenance on site, and LEED Silver building. Unit features include dishwasher, air conditioning, stainless steel appliances, tub/shower, walk-in closets, washer/dryer, window and coverings.

Unit Type 1 Bed 2 Bed Totals/Ave.

# Units/Mix 75 (62.5%) 45 (37.5%) 120

Ave. Size 741 SF 1,011 SF 842 SF

Price/Unit $1,339 $1,363 $1,348

Price/SF $1.81 $1.35 $1.60

Comparable Non-Residential Uses • Dental Office: Located at 1131 S 19th Street in the Point Breeze Neighborhood. This rowhome, built in 1925, has 2,295 SF of 2-star office space with 1,000 SF available to rent at $19 PSF (NNN).

• Small Office: 1-star office at 901 S 13th Street, located two blocks north of the site in a rowhome neighborhood on a corner lot. This 3,000 SF building was constructed in 1915 with 1,100 SF available at $28 PSF (NNN).

• Warehouse: Located at 1921 Washington Avenue, across the street and one block west of the project site. The 17,000 SF structure was built in 2008 and is considered 3-star industrial distribution with 5,600 SF available to rent at $15 PSF (NNN).

• Retail: Located at 1118-1120 S Broad Street in the Point Breeze neighborhood, one block south of the site. The store was built in 1950, considered 2-star retail, and is only one story with 24,332 SF. The location currently has 12,116-23,332 SF are available with a CoStar triple-net rent estimate of $15-18 PSF. 23

Upcoming Developments A survey was completed by the community that communicated their preferences for the new developments along Washington Avenue which gives great insights into what the corridor should include. Some of the major findings from the survey were the need for parking, a desire for local shops with character (not big box stores), more restaurants to encourage foot traffic in the area, and an interest in the industrial aesthetic that is reflective of the history of the corridor’s history.

The community also voted on what types of uses they thought were most appropriate/needed on Washington Avenue and the results were as follows: 85% restaurants, 65% bars/breweries, 52% fresh food markets, 40% family-friendly entertainment, 35% daycare/childcare, 33% office/co-working/artist space, 29% light industrial (eg. bakery, printing) and 27% medical professionals.

The Washington Avenue has many projects in the planning stage. The corridor has received a lot of interest from developers in recent years with some projects being more community focused, while others are primarily focused on luxury properties and maximizing financial gain. The projects listed are all within a ½-mile radius of the site and will have significant impact on the proposed project.

1. 2401 WASHINGTON AVENUE: This planned development is designed to the IRMX standards (currently zoned I-2) and embodies the community-supported vision for this area—it even has a community benefits agreement (CBA) already in place with South of South Neighborhood Association (SOSNA). The plan includes 45,000 SF of residential with 80 units and 8,000 SF of commercial space on Washington Avenue. Most of the height is concentrated along Washington avenue 24

(67 feet) and reduces in height closer to the small-scale neighborhood rowhomes along Kimball Street.

The development includes two for-rent apartments as well as townhomes and condos. The units include 10% affordable units at 50% AMI, which is in line with Philadelphia’s Inclusionary Zoning bill. The design for the project respects the industrial character of the street by using brick facades and industrial sized windows. The commercial space will focus on finding tenants that are local businesses instead of big box stores and national chains. These are the types of qualities are that the community is interested in having on the redeveloping Washington Avenue corridor.

The site will accommodate 38 parking spaces for the 80 units which is greater than the required 3/10 ratio in the IRMX zone. There will also be a variety of bike spaces both inside, outside, and on the sidewalk. The site plan also allows for a large sidewalk with new street trees that will greatly enhance the public right of way. This development has been a great model for high quality design that works with the community to deliver something that is needed an wanted by existing and future residents.

2. 1600 CARPENTER STREET: This site is directly across the street from the project site and is currently used as a Vietnamese shopping plaza. The planned development including demolishing the existing one-story structure to build a 44unit housing development including 22 attached single family homes, 3 two-family buildings, and two six-family buildings. The plans are being done by a local development group called Streamline. The homes are planned to be three 25

bedrooms. The multi-family buildings will be closer to Washington Avenue and will be 48 feet high. The materials will likely be fiber cement siding and metal with synthetic wood garage doors.

3. 2100 WASHINGTON AVENUE: This site was the former Frankford Chocolate and Candy Factory but has recently been demolished by Ori Feibush of OCF Realty under questionable circumstances. The community is not happy with this project and many people are frustrated with his other developments in the Point Breeze neighborhood. This project in in the process of getting zoning approvals and plans to have 40 townhomes, and a 260-unit mixed-use apartment building.

OCF Realty has preliminary agreements with Aldi and CVS to occupy the ground floor. The plan is to start construction on the $70 million project in the Spring of 2020.

4. 2118 WASHINGTON AVENUE: This site has exciting plans for a craft brewery called Dock Street, which would be opening their second location with a taproom on the corridor. The brewery is taking over 11,000 SF in a former warehouse where it will have most of the company’s beer production, including the cannery.

5. WASHINGTON AVENUE AND S. BROAD STEET TOWER: Well-known Philadelphia developer and CEO of Tower Investments, Bart Blatstein , plans to build 1,000 apartments and 160,000 SF of retail with parking for up to 600 cars on this valuable corner lot, purchased for $20M. This project has been in the planning stage for a while, and it is unclear when it will be completed.

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Proposed Project Uses and Rents The project will serve a variety of uses and users to address the needs of the community and the changing nature of this gentrifying neighborhood, which is clearly displayed by the upcoming developments reviewed in the market analysis. The proposed development plans to be mixed-use including retail, healthcare, and education / employment training in addition to mixed-income residential. Although affordable housing rents are set by HUD, the market rate rents were determined by analyzing the market comparables. The table below lists the proposed unit and tenant mix in addition to the residential rents: Unit Type

Mix

30% AMI

60% AMI

80% AMI

Market

Studio

20%

$393

$866

$1,182

$1,400

1 Bed

35%

$417

$924

$1,262

$1,500

2 Bed

25%

$488

$1,096

$1,502

$1,900

3 Bed

20%

$553

$1,256

$1, 725

$2,800

20%

30%

10%

40%

Mix

The proposed rent for the various commercial uses were also determined by the market analysis and are as follows: •

Retail/Restaurant– $18 PSF

•

Healthcare/Medical – $26 PSF

•

Education Services – $22 PSF

•

Employment Training – $15 PSF 27

–Project Design and Social/Environmental Impacts Project Design Program Overview

Figure 3.1 Project Rendering (Source: Author)

The proposed project has a total area of 271,000 SF. The development is primarily new construction but also includes an adaptive reuse portion which will house 27,000 SF of employment training. The new construction program elements are composed of the following uses and sizes: • • • • • • • • •

Healthcare: 33,000 SF Small Office: 3,000 SF Retail: 20,000 SF Education Services: 12,000 SF Employment Training: 30,000 SF Mixed-Income/Affordable Housing: 93,000 SF Residential Amenity: 12,000 SF Transitional Housing: 28,000 SF Sub-grade Garage: 40,000 SF 28

Figure 3.2 Exploded Axon, Building Program (Source: Author)

Figure 3.3 Second Floor Plan (Source: Author)

Figure 3.4 Typical Residential Floor Plan (Source: Author)

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Project Amenities In addition to on-site retail, healthcare, healing garden, education services, and employment training, the site will also have several other private residential amenities. These amenities are competitive with the market comps including a fitness center, lounge, several accessible roofs decks/terraces, patio with grills, computer/business center, conference/study rooms, package lockers, on-site management and maintenance, controlled access, and secure package lockers.

Massing and Structure

Figure 3.5 Building Axon (Source: Author)

This mixed-use building will be six stories plus a penthouse loft at its tallest point (80 feet) along Washington Avenue. This six-story bar building will house retail on the ground floor, healthcare in the second level, and residential in the upper stories. The sections of the building that extend towards the south side of the block 30

will terrace down to five and then four stories to help break down the scale of the building and help to ease the transition to the surrounding small-scale rowhome neighborhood.

The height along Washington Avenue was primarily determined by the planned zoning for this site, IRMX. This zone allows for 60-foot-high construction and an FAR of 5. The code also mentions bonus floor potential which is why the planned project has added a six story plus penthouse to maximize the vertical area on the portion of the block most appropriate for extra height. Although the FAR of this site allows for more buildable area than is proposed, due to the industrial nature of the zone it’s not appropriate for a mixed-use/multi-family building based on access to light and air for all units. This is another justification for building higher than the height limit included in the code. The inclusion of industrial uses, community services, and affordable housing makes the approval of this additional story/height very plausible.

The construction method will be a combination of light wood framing and concrete. The four levels (plus loft) of residential will be constructed using light wood framing and will sit on a two-story concrete podium. The ground floor within the podium will be 20’ tall so that the retail can include lofts that maximize rentable square feet in addition to accommodating the two-story parking needs. The second level of the podium will wrap around the parking garage and will be the shell for the healthcare facility. The top of the ground floor podium, above the parking garage, will support the intensive green roof that will be used as a healing garden directly accessible by the healthcare space on the second level of the podium.

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Parking Accommodations The site will have a two-story parking garage in the podium of the building, accessible from the side street. The second story of the parking structure will be fully above grade, while the lower level will enter at grade and slope down to -5 feet on one drive aisle and then slope down an additional 5 feet on the other side. This results in minimal excavation while achieving two full levels of parking in a 20 foot above grade podium. This garage will hold 70 cars including 6 ADA spaces.

If necessary, the site can also accommodate 10 surface level parking spaces in addition to the street parking available along Washington Avenue. There will also be one loading zone off the alley that can service the site from the garage and directly into the adaptive reuse warehouse. These parking accommodations are in line with the parking requirements by the IRMX zone which will be covered in more detail in Chapter 4.

Public Realm In addition to the impact of the appearance of the building on the public realm, the site design will also have a meaningful impact on the pedestrian experience. The existing condition of the street is not pleasurable from the pedestrian perspective. The street is very wide, car-dominated, and has long, uninteresting facades that are not public/active uses. The street also lacks human comforts such as trees and street furniture, all contributing to minimal foot traffic.

A new building with many exciting, active uses on the ground level will help increase pedestrian activity in this area. In addition to new uses and an inviting ground floor façade, the sidewalk experience will be improved by including 32

streetlamps, trees, trash cans, benches, and a pocket park. Adding these benefits to the public realm will be good for the existing community, the new residents, and revitalization efforts already present along Washington Avenue. This location is an ideal place to invest in these types of street improvements due to its transit-oriented location, walkability, and proximity to Center City.

Figure 3.6 Project Rendering: Washington Ave. Street Entry (Source: Author)

In addition to the ground floor uses and street condition, the exterior façade design of the development will also have a big impact on the public realm. Based on the industrial history and continuing uses, the façade design of the project aims to pay homage to this identity by using industrial-esque materials such as brick and metal.

The building also will include warm and renewable materials such as wood which creates an intriguing blend of an industrial, loft-style building with the warming and welcoming effect of natural wood.

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Unit Types and Tenant Mix The units will have variety in both unit type and tenant mix to apply to a wide range of needs in this community. The mixed-income units will include the following sizes: studio, 1 bedroom, 2 bedrooms, and 3 bedrooms. The tenants renting these units will be a combination of market rate Figure 3.7 Typical Residential Floor Plan (Source: Author)

renters and affordable housing

tenants ranging from units provided at 30% AMI to 80% AMI. There are 86 mixedincome units included in the project with approximated 22 units per each 20,000 SF floor plate (83% efficiency). The units on the fourth floor of residential will be twostory units, allowing for larger units in the loft-style apartments.

There are three targeted user groups for this project. The first user group includes existing residents of the Point Breeze neighborhood who need affordable housing and who may be pushed out of their neighborhood due gentrification if options are not provided to them. The second user group contains the new residents coming into this area because of the revitalization efforts. This user group comprise

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Figure 3.8 Project Rendering: Mixed-Income Balcony (Source: Author)

the higher income tenants either 80% AMI or market rate. Other market rate renters could include medical professionals working in the healthcare facilities on site.

The third, and more unique user group, are homeless adolescents in need of transitional housing and services. This is an important population who often go unseen and who do not have enough dedicated support. This tenant type would be provided supportive housing in the form of a co-living unit, either a single room occupancy (SRO) or a group home that is located in a different area of the building than the mixed-income housing. This portion of the development will require strategic financing methods through local/state/federal grants, tax credit programs, and donation/fundraising. This program will be operated and maintained through profit-sharing from the other portions of the project that will generate revenues.

Figure 3.9 Project Rendering: Group Home Porch (Source: Author)

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The transitional housing is designed with three stages to help homeless adolescents re-build their lives and ultimately become self-sufficient, contributing members of the community. The first stage is short-term, SRO unit with a shared bathroom and co-live space on each floor. The second stage is the mid-term group home with four bedrooms and shared living/kitchen/dining space with two microunits per floor for live in staff. The final stage is a 30% AMI unit in the mixedincome housing, which can be applied for once all rehab, education/employment training programs are complete, and a stable income can be proven.

Figure 3.10 Homeless Adolescent Integration (Source: Author)

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Social Impact A primary investigation of this capstone project is designing and financing a social enterprise development. The inclusion of the homeless adolescent user group is a key element in the exploration of incorporating high social impact program elements in a non-traditional way. This type of social entrepreneurship approaches social impact as being integral to projects and companies that are not charities or religious organizations.

Community Needs and Project Vision Due to the growth and expansion of Center City, developers have targeted Point Breeze as a neighborhood ripe with opportunities. This revitalization is exciting, but it also poses issues for existing residents who won’t be able to afford to stay in the area once redevelopment is complete. In addition to affordability, there are community concerns over the changing nature of their neighborhood and their identity. This is why this site is appropriate for a social enterprise development project. 1600 Nexus has an excellent opportunity to be an example of equitable development amidst this gentrifying neighborhood and be a model for future projects with a similar vision.

Overall Community Benefits This development will support the recent investment and revitalization in this area while also providing for community needs. This new building will support the economic growth of the area in several ways. First new jobs will be created in the ground floor retail, healthcare facility, and management/operations/maintenance of 37

the project. Second, the inclusion of employment/education training will help increase the education levels of residents and job readiness of low-income residents which will ultimately increase income levels in this area.

Figure 3.11 Project Rendering: Warehouse Mezzanine (Source: Author)

Third, the medical practice on site will increase equitable access to healthcare while also becoming a draw for people with private insurance to travel from other neighborhoods to come to this healthcare facility. The healthcare in the project will be a partnership with UPenn’s Family Medicine and Community Health Department of the Medical School. This practice will provide an integrated approach to physical and mental healthcare and incorporate biophilic design principles that encourage healing and connection. This innovative and needed method of care will attract all types of users not confined to the Point Breeze neighborhood. The physical healthcare will primarily focus on family medicine primary care but will also include internal medicine, dentistry, and physical therapy sub-specialties.

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Figure 3.12 Healthcare Facility Plan and Renderings (Source: Author)

Lastly, the exciting new retail including restaurant and café uses, will stimulate pedestrian activity and spending along Washington Avenue. This will help continue the growth of this area and encourage more integrative uses along the corridor. However, this project is much more than contributing to the economic growth of the area, but it is about providing for the needs and wants of a community that is not being heard by many developers coming to this area. The design of this project responds to the types of architecture and uses that the community has expressed an interest and a need.

The mix of uses and services included in this project provide residents unique access to new opportunities they may be seeking.

Figure 3.13 Project Rendering: Washington Ave. View (Source: Author)

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Sustainability Leadership in Energy and Environmental Design (LEED) Building sustainably has become increasingly important in the construction industry since buildings are major contributors to material waste, energy consumption, pollution, and global warming. As an architect/developer, being a good steward of the environment is essential. One of the primary certifications of green building is USGBC’s LEED rating system, and the design of this building will aim to be LEED Silver or higher. LEED includes six main categories and this project will address these categories through a variety of strategies (listed below): 1. Sustainable Sites – transit-oriented chosen site location, improvements to streetscape, bike storage, reducing heat island effect/ restoring natural habitats/ stormwater control through green roofs 2. Water Efficiency – grey water recycling 3. Energy and Atmosphere – increased insulation and reduced energy load from green roofs, extra vegetation on cool roofs helps purify polluted air and improve air quality, solar panels on non-vegetated roofs produce renewable energy to be used on site 4. Materials and Resources –use of light-frame construction utilizes a renewable material, additional use of recycled materials for building construction such as steel and concrete, single stream recycling and composting to be implemented programs 5. Indoor Environmental Quality – LED lighting, maximization of natural and views of nature, low-emittance materials (adhesives, sealants, paints), operable windows 6. Innovation in Design – social impact, equitable access, healing garden Although green buildings cost approximately 2% more to construct than traditional building methods, this larger initial investment has a greater pay off over time through reduced operation/maintenance expenses and through less monetary benefits 40

such as occupant health and well-being. This type of investment makes sense for long-term investment projects that are not focused on quick gains, which aligns well with the goals of this capstone project.

Planted Cool Roofs One of the major design goals of this project is to create a strong connection with the outdoors, embracing the concepts of biophilic design. The idea of biophilia is that humans have an inherent tendency to desire to associate with nature and life-like patterns and processes due to our evolutionary history. Human interaction with nature has been shown to improve physical/mental health and overall well-being, increase productivity, facilitate learning, encourage creativity, and quicken healing.

Accessible, planted, cool roofs are a major way the project design connects occupants directly to nature. A healing garden is located on the roof of the parking garage, which serves as the courtyard of the healthcare facility. There are a variety of outdoor spaces or different scales that serve different uses and user groups on site.

These outdoor spaces not only contributing to wellness of occupants, but also greatly contribute to the building’s sustainable efforts. Planted cool roofs increase the permeable area on the site, reducing stormwater runoff, and provide increased insulation, reducing heating/cooling needs and noise pollution. Traditional roofs emit heat from the sun, contributing to the urban heat island effect, while vegetated roofs absorb and reflect the heat, reducing the surrounding air temperature. Highly vegetated green roofs on site will absorb C02 emissions, cleaning the air, while also creating sustainable animal and insect habitats, helping to restore natural systems and biodiversity to the urban environment.

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- Regulatory Context and Approval Process Local Government Philadelphia Planning Department In 2011, under Mayer Michael Nutter, the Philadelphia Planning Commission and Zoning Commission came together to produce the Philadelphia 2035 Citywide Vision. This plan emphasizes the projected increase in residences and the importance in supporting investments that will help capture and retain jobs in Center City. The plan also displays support for the renewal and transformation of industrial legacy areas. With Philadelphia’s manufacturing history there remains many buildings and zones that are now abandoned or underutilized that should be viewed as assets and opportunities for new jobs.

The 2035 plan identifies three main themes: Thrive, Connect, and Renew. The first theme, thrive, focuses on improving neighborhood livability and economic development through transit-oriented developments, community services, affordable housing, and targeting industrial land assets for continued growth and redevelopment.

The second theme, connect, focuses on transportation by improving the safety, efficiency, and convenience of public transit in addition to increasing pedestrian and bike paths. The third theme, renew, focuses on equitable access to open space and preserving/reusing historic resources. This capstone project is in line with all three of these themes, but especially the two themes, thrive and renew.

The citywide vision was further implemented through the creation of 18 more detailed district plans. The project site is located within the South District, which 42

published their District plan in 2015. West Washington Avenue is identified in the plan as a legacy industrial corridor that specializes in the sale and distribution of building supplies. However, the changing nature of businesses along this corridor, residential growth, and redevelopment pressures suggest that Washington Avenue should be rezoned to IRMX to accommodate new and existing uses not served by its current I-2 zone. The plan identifies Washington Avenue as a future mixed-use corridor and mixed-use residential projects have already been approved by the Zoning Board of Adjustment. This vision for the corridor is supported by the majority of residents with 58% agreeing that residential mixed-use is an appropriate use for the corridor. The plan intends for the IRMX zone to attract more job-producing industrial development along with multi-family residential, neither of which are coming to Washington Avenue under the current zoning.

Political Influence Councilman Kenyatta Johnson, born and raised in the Point Breeze Neighborhood, was re-elected to office earlier this year. One of the key issues in his campaign was regulations for new construction in a fast-gentrifying district. He also promises residents that he will fight for property tax relief. Although Councilman Johnson supports mixed-use projects along the Washington Avenue corridor, he has not, and will not, rezone the street to IRMX. He is intentionally keeping the old I-2 zone on the corridor so that the community has some leverage over developments that are being planned. If the parcels on Washington Avenue were rezoned to IRMX, developers would be able to build large-scale developments by right and they would not be required to have public community meetings with SOSNA (South of South 43

Neighborhood Association). Councilman Johnson is trying to protect community interests by making developers meet with the community and the himself before requesting a zoning waiver from the city’s Zoning Board or Adjustment. SOSNA is an active neighborhood association that strives to have developers sign a CBA (community benefits agreement) for new projects. SOSNA wants to see more job opportunities and affordable housing on Washington Avenue that will lead to a walkable, mixed-use, mixed-income neighborhood.

Another important political influencer of development is Mayor Jim Kenney.

Earlier this year Mayor Kenney proposed a plan that would put $5 billion towards revitalizing struggling neighborhoods. This plan would fund improvements to the public-school system, increased police presence, improve infrastructure, and add $80 million over the next six years to the Housing Trust Fund dedicated to helping fund affordable housing projects. The Mayor also established the Resilience Project to clear homeless encampments and help the homeless find health services and/or temporary housing off the street. The budget for the project is $36 million over the next 5 years, with $26 million going specifically to the Office of Homeless Services to fund emergency, temporary, and long-term housing, and $6.5 million directed to the Department of Behavior Health and Intellectual Disability Services for community outreach, recovery housing, and more.

The goals of Councilman Johnson, Mayor Keeney, and SOSNA are all in line with the planned community-oriented capstone project. Support from the community and a variety of funding sources are available to help this social impact project come to fruition.

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Approvals Process Zoning Permit All projects and businesses in Philadelphia require a zoning or use registration permit based on the allowances in the City of Philadelphia’s zoning code. Some permits can be acquired “by-right,” which means that the planned use of the property is already allowed within the current zoning of the site. This makes acquiring a permit much simpler, faster (20-day review), and cheaper. However, most cases require an application that must be submitted to the department of Licenses and Inspections (L&I) for a formal review and has a $100 filing fee. Within the zoning permit there are typically other approvals that also must be obtained from other city organizations including the Historical Commission, Art Commission, a Registered Community Organization (SOSNA), Streets Department, and the City Planning Commission.

Depending on the details of the project proposal, one or more of these additional approvals may be required to obtain a zoning permit.

When a proposed project goes outside of the allowances prescribed in the zoning code, and is not “by-right,” a special approval (variance) from the Zoning Board of Adjustment (ZBA) is required, which is a longer and more expensive process. There are two types of variances, use variances and dimensional variances.

The variance process takes 3-6 months and requires an application to L&I who gives a refusal or referral which is then brought to the ZBA. While the zoning appeal is being scheduled, the developer must meet with the local RCO (SOSNA) to discuss the scope of the project. The decision to allow or deny the request is then made at the ZBA hearing. An accelerated plan review can be done in __ time and costs $420.

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Figure 4.1 Permit Process (Source: PhiladelphiaZoning.com)

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For this capstone project fully re-zoning the site makes more sense because of the extent of the project that falls outside the current zoning, both use and dimension.

This is also the approach that other planned developments along Washington Avenue are currently taking— re-zoning from I-2 to IRMX. However, this process should not be as arduous as a typical re-zoning because the Planning Department’s South District Plan designates the intentions of the Washington Avenue corridor (including the project site) as a future IRMX zone. As noted in the previous section, Councilman Johnson supports this change to mixed-use and is already working with developers to re-zone certain parcels, but he purposefully requires each project to be approved to ensure developers work with the community instead of being able to develop “byright.” The process of re-zoning a parcel cannot be done solely by the developer, “spot zoning” must be done by a member of City Council.

Building Permit All new construction, demolition, renovations, repairs, alterations, tenant fitouts, electrical/mechanical/plumbing work, and signage must obtain a building permit before commencing work and after the zoning permit has been obtained. The building permit is submitted to the L&I department and requires detailed construction plans from an architect/engineer in addition to several reports and forms related to structure, soils, asbestos, inspections, etc. Processing time is 20 days and includes a $100 filing fee. If the department requires more information about your project the process can take longer, but there is an expedited option for an extra $540. Once work has finished on a project it also requires a permit to register a building’s occupancy and obtain a certificate.

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Zoning Regulations Industrial-Residential Mixed-Use •

• • •

•

Uses Allowed: This zone allows for a great variety of uses within residential, parks, public, civic, institutional, office, retail, commercial, wholesale, distribution, artisan industry, and some urban agriculture including community gardens and greenhouses. The main thing to note is that this zone allows for the intended program uses proposed for this capstone.

FAR / Height: 500% - 60 ft height; frontage along a street less than 35 ft requires max height of 38 ft for the first 8 ft of the lot Lot Coverage / Setbacks: 75% - 0 ft setbacks (5 ft for roof decks) Parking: Shared parking factor of 1.2 can be applied o Residential: 3/10 parking ratio for multi-family projects, 1/10 ratio for group living, and a 1/20 + 1 (min 2) ratio for single room occupancy o Commercial: 1/1,000 SF for educational facilities, 1/4 bed design capacity for hospitals, and 1/2,000 SF for industrial. The zone does not require any parking for restaurant, office, or retail uses. o Accessible: 2% for multi-family and 10% for medical facilities o Loading: 2 off-street loading spaces o Bike Parking: 1/3 ratio (every 5 bike spaces can reduce one car space) Bonuses: additional floor area given for inclusion of mixed-income housing (*Other zones allow for additional height bonus as well, which will be requested for this project due to the high FAR, but very low height limit*) Overlay Zone The West Washington Avenue Overlay District (WWA) (west of Broad

Street) can be found in section 14-518 of the Philadelphia zoning code. This overlay zone outlines additional standards of development on top of the zoning code. The overlay includes eating/drinking establishments as a permitted use and permit nonaccessory structured parking on lots with 20,000 SF of office/ retail/ commercial/ civic/ institutional use on the ground floor. The maximum occupied area is 90% for lots with at least 20,000 SF of office/ retail/ commercial/ public/ civic/ institutional use on the ground floor. The overlay zone also includes notes about parking garages fronting Washington Avenue and off-street loading height requirements.

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– Construction and Development Timeline Project Construction Construction Type As mentioned in chapter 3, 1600 Nexus will be Type VA construction, consisting of a two-story concrete podium topped with five stories of light-wood framing. As required by this construction type, the wood frame will be fire protected, with no framing members exposed. All (loadbearing) wall and floor/ceiling/roof assemblies must have a minimum one-hour fire rating and the structure must also be sprinklered, which will increase costs. This construction type was chosen due to its overall affordability, quick construction ability, and use of renewable wood material.

Project Hard Costs There are several categories of hard costs that must be noted in the construction of 1600 Nexus. Not only does the building employ concrete and lightwood framing, but there are also important project costs associated with the demolition of existing buildings, the preservation/adaptive reuse of the existing warehouse, site work/landscaping, and the (one level) below-grade garage. The project hard costs were also increased by 2% to account for the additional cost for adhering to green design standards and sustainable systems. The following chart outlines these various costs which are the primary contributors to the total development cost of $57,069,397.

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Concrete

Wood

$200

$120

Demolition Preservation $6

Garage

Site Work

$75

$10

$90

Figure 5.1 Per Square Foot Construction Hard Costs (Source: Author)

Hard costs for the project also include general conditions (3%), contractor profit and overhead (8%) and a construction contingency (10%). The total hard costs come to $40,570,340, which is 71% of the total development costs.

Notable Construction Logistics One of the most notable aspects regarding the construction logistics for this project is the extensive separation of uses and users. The separation of uses is not only programmatic, but it also relates to the construction materials and fire separation requirements found in the international building code. The combination of uses and users will also result in a greater scope of security for the project including increased access controls, key card entry, and monitoring systems. This additional scope ultimately results in a larger budget for the electrical system needed for the building.

Another important part of this project is the preservation and renovation of one of the existing warehouses on the site. This adaptive reuse calls for a structural review to confirm the condition and capacity of the existing structure. This report will include recommendations for re-use, reinforcing, or replacing of the existing structure. The warehouse will need refurbishing and sealing of existing roof members in addition to restoring the exterior brickwork. The interior will also undergo significant improvements including the construction of a mezzanine level.

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Development Timeline 1600 Nexus will take a total of 48 months to complete from the initial site acquisition to the achievement of stabilization. The following chart outlines the critical path:

Figure 5.2 Development Timeline Critical Path (Source: Author)

1. Site Acquisition (8 months) • Negotiate purchasing price 2. Due Diligence (8 months) • Site survey • Environmental report (phase 1 & 2) • Market study • Financial feasibility study • Secure financing 3. Entitlements / Re-Zoning (10 months) • “Spot-zoning” change through Councilman Johnson • Conceptual design package • Community meetings (SOSNA agreement) • Begin fundraising 51

4. SD and DD Packages (6 months) • Schematic design from architects • Form partnership with large commercial tenants • Design development from architects • Continue fundraising 5. Construction Documents (4 months) • Secure equity sources and soft debt/grants • Final construction documents from architects • Continue fundraising 6. Permitting (2 months) • Submit drawings for building permit 7. Construction (18 months) • Demolition of existing structures • Excavation for foundation and sub-grade parking level • Cast-in-place concrete podium • Five stories light-frame construction • Restoration and renovation of existing warehouse 8. Marketing / Lease-Up (20 months) • Market small commercial spaces during construction • Pre-lease 40% of market rate rental apartments • Begin taking affordable housing applications 9. Stabilization (6 months) • Most affordable and transitional units will be pre-leased and there will likely be a waiting list for these units • With only 34 units being market rate, almost half of these units should already be leased once construction has been finished • Within six months after delivery the remaining market rate units will be marketed and leased and stabilization achieved within year 1 • Construction loan converted to permanent, low-interest loan

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- Marketing and Management Marketing Plan Target Audience and Project Vision The marketing approach for 1600 Nexus is somewhat unique because it has three different user groups, unlike a typical multi-family project that would normally cater its product to a more specific audience. Because of this, there will be residents of various ages, family types/sizes, and socioeconomic classes. This mix of residents has the potential to create a vibrant and diverse community, but it also requires a reliable and highly experienced property management team. Unique user needs must be dealt with carefully, ultimately ensuring resident safety and comfort. This unique community is a result of this capstone’s exploration of social enterprise development, with this project specifically focusing on how to help vulnerable populations of Philadelphia, and more specifically, the neighborhood of Point Breeze.

The property has a relatively high ratio of commercial to residential at 30% to 70%, resulting in a significant portion of the marketing budget being dedicated to finding and keeping commercial tenants. Most of the commercial spaces in the project are large-scale and are intended to be long-term partnerships (healthcare partnership with UPenn, education/job training partnership with Philadelphia Works).

There are also a few smaller retailers that will likely focus on food/dining opportunities to give more character/identity to the Washington Avenue corridor and bring more pedestrian activity in and around the site. This use was also expressed as a primary interest of current residents living in the Point Breeze neighborhood.

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The Four Ps of Marketing 1 – Product: What is being sold? What is the overall use? What special features are included? What is the impact of the design? What is the quality of the finishes? What options are available, how much variety?

The overall design for 1600 Nexus focuses on connecting the various users and uses with the outdoors due to the (scientifically proven) positive impacts that nature has on mental and physical health, general wellbeing, learning, productivity, creativity, and forming relationships. This unique design feature is a major selling point for potential tenants who can enjoy planted roof decks, mini courtyards off the corridors, and individual balconies. The education portion also prioritizes outdoors spaces along classrooms, and the healthcare center wraps around a central healing garden. Not only is the biophilic design important in general, but it is particularly unique feature for a dense, urban location. This connection to nature will draw more market rate tenants who appreciate this amenity, since it is not found in the local area comps.

The design of the residential units responds differently based on orientation.

Northern units have a shallow layout, maximizing ambient north light, while southern units are deeper, allowing for direct sunlight to penetrate into the unit. Some of this southern light is shaded through wooden pergola-balconies with trellises. Engineered wood panels are used throughout the façade system to bring natural-feeling materials to the exterior and provide the user with greater comfort. Other interior finish materials for the residential units focus on natural color tones to continue the connection with the outdoors and create an indoor environment that feels inviting and calming for the occupant.

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The commercial products at 1600 Nexus will bring a variety of visitors to the site for different services and retail/dining experiences. The healthcare center on-site is a unique integrated practice that brings together physical and mental health services. This private medical practice is run by University of Pennsylvania’s Family Medicine and Community Health Department, and features an innovative approach to combining primary care, internal medicine, physical therapy, and behavioral health all under one roof to comprehensively address patient needs. This unique facility will bring holders of private insurance from all over the metro area in addition to providing for the health needs of underserved populations.

The education and employment services on-site will also be an important service element that will bring members of the community to the site. These services will be highly utilized by the residents of the transitional housing units but will also be available to residents of the mixed-income units and to the general community.

This use is partially housed in the existing warehouse that will be refurbished, which is a great way for the site to connect to Washington Avenue’s industrial history, while the entire development of 1600 Nexus addresses its future as an active mixed-use commercial corridor in the South District.

Lastly, the retail/dining spaces will target smaller, local restaurants that will help establish the Washington Avenue corridor as an active pedestrian area in South Philadelphia with unique dining experiences. The existing residents want their community to have a strong identity, which means avoiding large national chains.

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Figure 6.1 Project Rendering: Housing + Healing Garden (Source: Author)

Figure 6.2 Project Rendering: Healthcare Facility Healing Garden (Source: Author)

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2 – Price: What is the lease price? How do the rents compare to the area comps? Are there any incentives being offered?

The lease costs vary based on income level for affordable units (30% of AMI for LIHTC funding units) and market rate units will be leased at an average of $2.43 PSF. This rental rate fits in between the older product on the market and the new, luxury buildings that have recently been constructed along Washington Avenue.

Rental concessions have been factored into the financial modeling for the project based on the assumption that market-rate lease up could be slow based on 4-5-star multi-family building vacancy rates in Philadelphia. There is also a concern regarding market-rate tenants being hesitant to rent based on the tenant mix and sensitive programming aspects. However, the property also has a lot of great amenities to offer market-rate tenants, as previously discussed. These unique features plus rental incentives, such as the first month free or a reduced parking price, will help quicken the initial lease-up period.

3 – Place: Where advertising? What are the primary platforms?

It will be essential for the marketing of 1600 Nexus to address several advertising platforms including social media, public transit signage, word or mouth, apartment search engines, and signage at the site during construction and after completion. Rental search websites such as apartments.com, trulia.com, zillow.com, and hotpads.com are some of the most popular sites and will be essential for the residential marketing efforts of this project in addition to the 1600 Nexus property website. Social media will also be extremely useful as most millennials see adds through their Facebook and Instagram activity. Public transit is an excellent way to 57

market to people throughout Philadelphia who may not be actively looking for a new apartment but draws their attention to the property for future rental needs. And finally, word of mouth is extremely important through existing residents’ good reviews of the property. A referral program is a great way to encourage happy residents to share their experiences with their friends, family, colleagues, and coworkers.

4 – Promotion: What types of events can be held to promote the property? How can the public be engaged?

Promotional events such as open houses and resident engagement activities are other important marketing strategies. These could include coffee socials, outdoor food vendors in the pocket park and pedestrian alley, yoga on the roof, and more!

These events create opportunities for residents to socialize with each other and to invite their friends and family who will have an opportunity to enjoy the property.

Events that are purely open to the public and not resident based are also great opportunities to advertise 1600 Nexus as a whole, hopefully bringing more business to the commercial uses on site.

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Management Structure As previously mentioned, it is essential to carefully select the management company for 1600 Nexus, due to its complex intersection of uses and tenant types.

Keeping all residents happy will certainly be one of the larger difficulties of this project. Mixed-income communities are still a relatively newer concept that is still being explored and improved. Having an experienced, reliable management company to provide daily maintenance, bookkeeping, collect rent, and respond to resident issues/concerns will be essential for the success of the project. This service is factored into the financial model as a 5% fee based on the effective gross income. 1600 Nexus will have one full-time property manager, one full-time operations manager, one fulltime maintenance worker, one part-time leasing agent, and two concierges on its payroll. The property will also require overnight security, which will be arranged through a separate security contract. More staff and surveillance will be present (day and night) in the transitional housing wing by the non-profit (Project HOME) that is running this program. All access points will be secured with key card access and transitional housing residents are separated from the mixed-income apartment units for resident security.

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- Project Funding and Financial Analysis Social Enterprise Development Feasibility The idea behind this capstone project was to explore the role of social entrepreneurship in the architecture/urban planning/real estate development industry.

1600 Nexus is a site-and-user-specific application of the overarching approach of social enterprise development. After going through the entire capstone process, including market analysis, site analysis, project design, regulatory context analysis, project cost estimating, and financing, 1600 Nexus can officially be deemed a successful test project for the feasibility of a social enterprise development.

This chapter will illustrate the financial feasibility of 1600 Nexus. However, it is important to note that the value of this project is not purely based on the bottom line, but instead is based on the idea of shared value. This development’s mission is to invest in an impoverished community currently experiencing gentrification and address the needs of the most vulnerable populations, including low-income families and homeless adolescents.

By investing in this community and helping those in need the project produces social benefit in addition to stimulating the economic system.

Figure 7.1 Social Enterprise Development, Shared Value (Source: Author)

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Development Cost Overview The total development cost for 1600 Nexus is $56,208,038. The hard costs comprise the majority of the cost, with 71% of the total. There were several categories included in the project hard costs which account for different per square foot construction cost calculations, which have previously been outlined in Chapter 5.

Figure 7.2 Sources and Uses Charts (Source: Author)

Soft costs for the project come to $6,589,085 which accounts for 12% of the total budget. The various services included in this section include the site survey, market study, appraisal, environmental reports, legal and accounting fees, architecture and engineering fees, and marketing fees. There is also a soft cost contingency (5%) that will help keep the project within budget if any fees exceed expectations or if substantial design changes are needed after holding community meetings. This community contingency is essential for 1600 Nexus since The Hunt Group plans to have a CBA and will be particularly responsive to community input and feedback.

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The site acquisition cost is a substantial piece of the overall budget, and to help offset this cost the project is eligible to receive $584,152 towards the depreciable assets on the site as a 4% credit under the 9% LIHTC deal. The developer fee is also an important aspect, since 50% of the fee will be deferred to help pay for the initial costs of the project and paid back over the first 8 years. The remaining costs include typical interim and origination financing fees, insurance, taxes, and reserves.

Funding Sources

Figure 7.3 Sources and Uses Summary (Source: Author)

Hard Debt 1600 Nexus will be acquiring the majority (43%) of its financing through a conventional permanent loan due to its additional federal funding sources and mix of programmatic uses. The terms of this loan are outlined in the chart: Figure 7.4 Mortgage Terms (Source: Author)

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Low-Income Housing Tax Credits This project relies heavily on receiving the competitive 9% LIHTC. This indirect federal subsidy will be used to fund the construction of the affordable housing units and half of the transitional units. Therefore, the tenant mix and rents received by these units must adhere to the program requirements for the 15-year compliance period. The LIHTC program is based on Section 42 of the Internal Revenue Code, which was enacted by Congress to encourage the private sector to contribute to the affordable housing stock on the market. The tax credits are awarded to projects supplying affordable housing which are then sold to investors to raise equity for the project. This equity reduces the amount that the developer must borrow, which makes this type of project financially feasible since there is less cash flow and lower profits than a typical market rate project. The IRS allocates these housing tax credits to each state, who then award the credits to qualified projects, which are distributed annually over 10 years. The LIHTC funds awarded to 1600 Nexus account for 38% of the capital stack.

Figure 7.5 LIHTC Calculation (Source: Author, HUD)

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Federal, State, and City Grant Programs 1600 Nexus takes advantage of several grant programs at the federal, state, and city level. These additional funding sources are primarily made available to this project due to its social impact focus. All grants listed are approximate and based on documentation of previous awards given by the programs to similar developments and overall program/fund allocation (either total or annual).

•

Community Development Block Grant (CDBG) - $450,000

The CDBG program works to ensure decent affordable housing, to provide services to the most vulnerable in our communities, and to create jobs through the expansion and retention of businesses. Funds must be used for activities that benefit low- and moderate-income persons. (Source: HUD) •

HOME Investment Partnerships Program - $600,000

HOME provides formula grants to States and localities that communities use – often in partnership with local nonprofit groups – to fund a wide range of activities including building, buying, and/or rehabilitating affordable housing for rent or home ownership or providing direct rental assistance to low-income people. (Source:HUD) •

Continuum of Care (CoC) - $350,000

The CoC Program is designed to promote communitywide commitment to the goal of ending homelessness; provide funding for efforts by nonprofit providers, and State and local government to quickly rehouse homeless individuals and families while minimizing the trauma and dislocation caused to homeless individuals, families, and communities by homelessness; promote access to and effect utilization of mainstream programs by homeless individuals and families; and optimize self-sufficiency among individuals and families experiencing homelessness. (Source: HUD) •

Pennsylvania High Performance Building Program – $400,000

The High Performance Building Program (HPB) provides financial assistance in the form of grants and loan funds to underwrite the cost premiums associated with the design and construction or major renovation of high performance buildings in the state. The program is administered jointly by the Department of Community and Economic Development (DCED) and the Department of Environmental Protection (DEP) under the direction of CFA. (Source: DCED) 64

•

City of Philadelphia Office of Homeless Services - $300,000

The Office of Homeless Services works together with more than 60 homeless housing and service providers, as well as city, state, and federal government groups, to make up Philadelphia’s homeless service system. Services include homelessness prevention and diversion, emergency/ transitional/ rapid re-housing, case management, and food distribution. (Source: Phila.gov) •

Philadelphia Housing Trust Fund - $500,000

This trust fund was created in 2005 and provides funding for the production or preservation of affordable housing and homelessness prevention. In September 2018 the Kenney Administration and City Council Committed to a $19 million contribution to the fund. (Source: phlcouncil.com)

Fundraising / Donation Half of the transitional housing units in 1600 Nexus receive funding from the 9% LIHTC deal based on the assumption that these residents will be able to contribute 30% of their monthly income to rent. This monthly rent is estimated in the cash flow to be $100, based on a resident working 16 hours a week at minimum wage. The other half of these units are assumed to be held by homeless adolescents who are unable to hold a job. This could be for a variety of reasons including intensive behavioral therapy, substance abuse rehabilitation, or education/ employment training time commitments. The construction of these units without any income is funded by the federal/state/city grant programs previously mentioned, in addition to the fundraising/donation ($2,250,000) from Project HOME – the organization that will be running the transitional housing program.

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Financial Analysis Equity Investment 1600 Nexus has achieved a healthy projected cash flow which is able to support a $3,139,738 equity investment to fill the funding gap. The investor can expect a 1.41 equity multiple which includes annual returns from cash flow and 5% of the profits at sale. The annual investor returns range from 1.2% at year 1 to 15.1% at year 15. The cash flow and expected returns can be seen in Figure 7.6 below.

Cash Flow

Figure 7.6 Projected 15-Year Cash Flow (Source: Author)

Although large portions of this project are focused on social impact uses, which are generating lower rents than a typical market-rate project, 1600 Nexus is projected to produce profits on both the residential and commercial uses from year 1.

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The commercial components of the project are 30% of the total development, however they are the larger income generator for the project. This income is used to help offset the affordable housing and transitional housing reduced (or non-existent) rents, which is the financial strategy behind the social enterprise development model.

Reversion Valuation and Profits The exit strategy for 1600 Nexus is based on a longer timeline due to the 15year compliance period for the Low-Income Housing Tax Credit program. This is typical for affordable housing, non-profit developers. Oftentimes they don’t plan to sell at all, but instead are long-term holders. However, the valuation has been calculated at year 15 should The Hunt Group chose to sell at that time.

Figure 7.7 Valuation and Financial Ratios (Source; Author)

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Sensitivity Analysis A sensitivity analysis has been conducted to determine how risk averse the project is to potential changing market conditions that could affect the reversion value. Even with an increased cap rate of 7%, the sale would still result in significant profits for both The Hunt Group and the potential equity investor.

Figure 7.1 Sensitivity Analysis (Source: Author)

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Bibliography Chapter 1 Sources: • • • • •

https://www.phillypolice.com/crime-maps-stats/ https://factfinder.census.gov/faces/nav/jsf/pages/index.xhtml https://www.socialexplorer.com/ https://statisticalatlas.com/neighborhood/Pennsylvania/Philadelphia/Point-Breeze/Overview https://www.areavibes.com/philadelphia-pa/point+breeze/crime/

Chapter 2 Sources: • • • • • • • • • • •

https://www.costar.com/ https://www.chop.edu/news/children-s-hospital-philadelphia-celebrates-grand-opening-southphiladelphia-community-health https://www.chop.edu/news/south-philadelphia-health-and-literacy-center-special-synergy https://www.southofsouth.org/post/2401-washington-avenue-community-meeting-recap https://philly.curbed.com/2019/5/29/18643979/south-philly-vietnamese-housing-projectdevelopment-washington https://philly.curbed.com/2019/6/5/18654089/frankford-chocolate-factory-demolished-razedwashington https://philly.curbed.com/2019/7/9/20687885/ocf-sells-half-of-frankford-chocolate-factoryproperty https://www.inquirer.com/real-estate/housing/frankford-chocolate-factory-aldi-demolitionwashington-ave-feibush-apartments-20190604.html https://philly.eater.com/2018/6/5/17429564/dock-street-brewery-opening-south-philadelphiawashington-avenue https://philly.curbed.com/2017/7/31/16059926/bart-blatstein-purchases-1001-s-broaddevelopment https://www.phillyvoice.com/luxury-apartments-rooftop-retail-slated-south-broad-street-lotdeveloper-settles-lawsuit/

Chapter 3 Sources: • • •

https://www.archdaily.com/925494/which-materials-are-easiest-torecycle?utm_medium=email&utm_source=ArchDaily%20List&kth=1,371,345 https://www.sempergreen.com/us/solutions/green-roofs/green-roof-benefits https://www.usgbc.org/projects/usgbc-headquarters?view=scorecard

Chapter 4 Sources: • • •

• • • •

https://docs.wixstatic.com/ugd/32cb1b_e695bf0dda42479b9dbb07f7d61a98c3.pdf https://drive.google.com/file/d/1c5sVjAUwj7toKIxmhzrbYUIF2TZCA09J/view https://www.inquirer.com/real-estate/housing/councilman-kenyatta-johnson-bay-windowsbalconies-bill-point-breeze-south-philly-development-gentrification20190528.html?fbclid=IwAR2TsNeojlt36aqw8btVhDdE-mmwnF9a86jAmHgrh4HZllJ6jS5SP65gLc#loaded https://whyy.org/articles/how-a-philly-neighborhood-negotiated-with-a-developer-and-won/ https://whyy.org/articles/south-philly-group-asks-chocolate-factory-developer-forcommunity-benefits/ https://whyy.org/articles/in-race-spotlighting-south-philly-gentrification-kenyatta-johnsonwins/ http://phlcouncil.com/kenyattajohnson/

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• • • • • • • • • •

https://philly.curbed.com/2019/3/7/18254819/mayor-kenney-5-billion-budget-proposal-planyear-fiscal https://whyy.org/articles/city-council-proposes-3-affordable-housing-fixes/ http://phlcouncil.com/wp-content/uploads/2019/03/NarrowingTheGapReport.pdf https://philadelphiazoning.com/philadelphia-zoning-permits/ https://permitphilly.com/2018/03/15/philadelphia-building-permit/ https://business.phila.gov/zoning-basics/ https://up.codes/viewer/philadelphia/philadelphia-zoning-code/chapter/14-300/administrationand-procedures#14-300 http://library.amlegal.com/nxt/gateway.dll/Pennsylvania/philadelphia_pa/thephiladelphiacode ?f=templates$fn=default.htm$3.0$vid=amlegal:philadelphia_pa http://phillyzoning.com/irmx/ https://www.phila.gov/media/20190305124635/Philadelphia-Zoning-Code_Quick-ReferenceManual.pdf

Chapter 5 Sources: • • •

Jessica Jones lecture slides Guest Lecturer in-class feedback https://dps.mn.gov/divisions/sfm/programsservices/Documents/Sprinkler%20Applications/ConstructionTypeDefinitions.pdf

Chapter 6 Sources: •

Jessica Jones lecture slides

Chapter 7 Sources: • • • • • • • • • • • • • • • •

https://business.phila.gov/city-state-and-federal-loan-programs/ https://business.phila.gov/credits-grants-other-incentives/ https://www.novoco.com/resource-centers/affordable-housing-tax-credits/lihtc-basics/aboutlihtc https://files.hudexchange.info/resources/documents/Low-Income-Housing-Tax-CreditSummary.pdf https://www.hud.gov/program_offices/comm_planning/communitydevelopment/programs http://www.dhs.pa.gov/cs/groups/webcontent/documents/document/c_266092.pdf https://www.hud.gov/program_offices/comm_planning/affordablehousing/programs/home/ https://www.curbed.com/2018/3/22/17151758/congressional-spending-bill-hud-affordablehousing https://www.nreionline.com/multifamily/investors-pay-more-anticipated-lihtcs-easingdevelopers-funding-fears https://www.hudexchange.info/grantees/philadelphia-pa/ https://files.hudexchange.info/reports/published/CDBG_Expend_Grantee_PHILPA_PA_2017.pdf https://www.hudexchange.info/programs/coc/ https://www.phila.gov/OPA/AbatementsExemptions/Pages/Abatements.aspx https://dced.pa.gov/programs/high-performance-building-program-hpb/ https://www.phila.gov/departments/office-of-homeless-services/ http://phlcouncil.com/city-marks-transfer-of-19m-to-housing-trust-fund-for-affordablehousing/

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