Community for Educators
By Bendix Anderson
6 min read
Oxford Mills replicates Seawall’s proven model
A new property in Philadelphia creates a community of learning.
“We wanted to use the built environment to roll out the red carpet for people involved with kids and education,” says Thibault Manekin, co-founder of Seawall Development, based in Baltimore.
Oxford Mills give educators a place where they can live, work and come together as a community. The mixed-use project includes apartments targeted to teachers. It also includes commercial space targeted to nonprofit educational organizations and community space – including a busy café and coffee shop – where educators can meet and share ideas.
Less than 60 percent of students graduate from high school in the Philadelphia school system. Philadelphia is in the midst of the real estate boom in Center City, but many of its neighborhoods still suffer with high poverty rates and crime.
Oxford Mills opened in the summer 2014 to provide a place where educators can meet and perhaps create solutions to these problems.
“Real estate is about making great spaces, not making as much money as you can as quickly as you can,” says Manekin.
The fully-occupied apartments are targeted to teachers, offering discounts of $200 to $400 a month in the rent – 23 of the 114 apartments are reserved for moderate-income households, earning up to 80 percent of the area median income. The rest of the apartments rent for unrestricted, market rents.
“When teachers have a stable environment to live in, they might be better teachers,” says Elaine DiPietro, Vice President of New Markets Tax Credit Program for the Enterprise Community Investment, Inc.
Oxford Mills also offers 38,000 square feet of office space targeted to educational organizations, with a discount to nonprofits. The 12 businesses that rent space in Oxford Mills include an “anchor tenant,” Teach for America, that occupies nearly a third of that office space. Other education-related businesses include a University of Pennsylvania “education business incubator” and the offices of Scholar Academies. There’s even a yoga studio.
The property also finds room for Gryphon Coffee, a locally-owned café and coffee shop with 13,000 square feet of space.
A great public space provides the heart of the community. The two buildings of Oxford Mills are also separated by a historic city street that has become a public space. One of the challenges of the development was to turn the long-neglected city street into private property.
The café and the public spaces create areas where education workers at Oxford Mills and the educators who live at the property can cross paths and share ideas.
“It has become a meeting place, a gathering place,” says DiPietro.
Manekin and his father, Donald Manekin, founded Seawall in 2007 to develop real estate projects that made a real difference for the communities around them. Seawall’s first two projects, Miller’s Court and Union Mill, were smaller versions of Oxford Mills. Seawall developed both of these properties in its hometown of Baltimore. Both mixed apartments targeted to teachers with commercial space targeted to educational organizations.
“We were invited to replicate the model in cities across the country,” says Manekin. “In Philadelphia, we found a great local partner.”
Seawall partnered with D3 Real Estate Development, based in Philadelphia, to create Oxford Mills, which is also sustainably developed to meet the tough environmental standards set by the Enterprise Green Communities Criteria.
Oxford Mills is the largest project so far for Seawall. With 200,000 square feet, it’s about twice as large as Seawall’s other two education projects, which range from 85,000 to 100,000 square feet apiece.
A large financing for a big project
To create such a large project, the developers gathered funding that would be difficult to repeat because of changes to essential programs, like the New Markets Tax Credit program.
It cost a total of $38.5 million to develop Oxford Mills. Seawall and D3 paid for the development with help from $9.1 million in equity from the sale of New Markets Tax Credits (NMTCs).
To generate those NMTCs, the developers had to gather $34 million in NMTC allocation from three different community development entities (CDEs). Enterprise Community Investment provided $10 million in NMTC allocation; Philadelphia Industrial Development Corporation provided $15 million and the National Trust Community Investment Corporation provided $9 million.
“We had three great CDE partners,” says Manekin.
The CDEs’ large contributions of NMTC authority are increasingly unusual, as more CDEs compete to win smaller and smaller allocations of NMTC authority from the U.S. Treasury’s Community Development Financial Institution Fund.
“Most CDEs don’t provide that much allocation anymore,” says DiPietro.
Oxford Mills also received a $17.7 million, seven-year mortgage from TD Bank. Another $6 million came from the sale of Federal Historic Rehabilitation Tax Credits. The last piece of the financing came from a $5.1 million deferred development fee.
That combination gave developers ability to use $34 million in qualified equity investments in Oxford Mills to generate NMTC, which provided the equity capital necessary to complete the renovation of the old mill.
TD Bank bought both sets of tax credits, paying about one dollar per dollar of historic tax credit. TD Bank paid in the high 70-cent-range per dollar for its NMTCs. Since the financing closed in October 2012, NMTCs now often sell for prices in the high 80-cent range per dollar of NMTC.
“The pricing for NMTCs has gone up as the demand has gone up,” says DiPietro.
Oxford Mills is one of the last developments that used equity from historic tax credits to generate NMTCs. Soon after the financing closed in 2012, the Internal Revenue Service issued guidance (Revenue Procedure 2014-2) in response to the Historical Boardwalk court case. The guidance provided “safe harbors” for investors and developers to follow that would insure that IRS considered all the partners in a NMTC deal as full partners.
If Oxford Mills had access to less NMTC authority, or had not been able to use its historic tax credit equity to generate NMTC, the property would have had to face a hole in its budget of several million dollars.
Oxford Mills is in Philadelphia’s South Kensington neighborhood, about three miles northwest of Center City. The neighborhood around the property has struggled for decades. Oxford Mills is located in a severely distressed census tract with an unemployment rate more than three times the national average. The property is a few blocks from the elevated train line and several bus lines.
The neighborhood around Oxford Mills has changed around the finished project. “Hundreds of new units have been built and there are new restaurants,” say Manekin.
The neighborhood is also becoming safer. “Now it’s a safer place to park – four years ago there was parking, but you might not want to have left your car,” say DiPietro.
Sources of Funds
Phase I
Permanent financing………………………………… $17.7 million
New Markets Tax Credit equity…………………. $9.1 million
Historic Rehabilitation Tax Credit Equity…… $6 million
Deferred developer fee…………………………….. $5.1 million
Total Sources $38.5 million
