it made economic sense to do so. We aren't in control of the economics. The banks look at our
proformas and they give us a loan based on those proformas. So the proformas just didn't work at
five or six units per building for those structures. So as a result, the building
remains in the condition that it did. We gutted the inside of the building so nobody would
um squat in it or find shelter in it um we've continued to clean up the areas in front and in
the back of it um when when people naturally dump stuff or litter stuff um there but as it stands
now the economics of that project do not work at six units per building okay switching gears a
little bit. You heard some concerns expressed by Ms. White about trash management and safety.
I believe we had you testify to this during our case in chief, but just very briefly, can you
again share with the board your trash management plan and your plan for safety of this Viola
Street? Sure. So the trash wouldn't have been next to Ms. White's home. It would have been on
So the trash wouldn't have been next to Ms. White's home.
It would have been on the opposite side of the building.
the opposite side of the bill.
And the trash would have been picked up five times a week, as we mentioned in our initial presentation.
So there's, you know, minimal to no opportunity for trash to accumulate as it's being picked up regularly by private pickup.
And we're totally fine with having that proviso that would mandate however many times a week the community feels that would benefit.
And we would adjust, you know, if we need to increase it, we'll increase it.
But that's, you know, we don't want our tenants to live around trash because, you know, I wouldn't want to do that either.
All right, Jeremy, you heard a lot of community testimony during the last resumption hearing and again today that talks about the design of the project.
did you seek to incorporate that feedback? Did you seek to incorporate feedback from that
testimony in any way? And while you're answering that, I'm going to bring up our exhibit packet.
Sure. So we've planned and we've testified in our initial presentation that this project is
kind of an extension of the project on Parkside Avenue. So the project on Parkside Avenue, as you
heard was a by right project. And we initially designed it with a much more modern design that
was more economically feasible. We met with the community, I believe, in November, they had
concerns about that design and how it did not. It was not sensitive to the historic character of
the neighborhood. We've attempted to, I believe, meet again, at least a half a dozen times. And
each time the the residents said they couldn't organize the meeting because people were on
vacation, it was the holidays, if it wasn't one thing or another. So we spoke with the neighbors
that we could have spoke with, Sean Solomon being one of them, who is reputable for his historic
preservation of his home and his devotion to the historic character of the neighborhood and
in history in general. And we've taken his insight, and I've shared many revisions of this
project, and he said it was quite common for buildings in Philadelphia to mimic the same
designs over and over, including the ones that are on Viola Street. If you take Viola Street
design as a whole, you'll see most of the buildings are repeated. The design is repeated
every third home. There's a bay, and that's what we attempted to do here. We created this
design for the Parkside Avenue facade, and then we redesigned the Viola Street facade to be more
welcoming, to have a front door, to, you know, to incorporate the comments and the suggestions
from, I believe, Mr. Cromer at the last meeting about his comment about the Uber drivers wouldn't
know to go to Parkside. So we said that that's fair. So we designed it to have that interaction
and and entrance from from Viola Street. So any feedback that we got, we attempted to incorporate
into the building. We've tried meeting with the neighbors several times over the course of the
last six, seven months, again, without any avail. I was stood up at the one meeting that that was
scheduled and we were notified, you know, and I don't want to reason I found out the meeting was
canceled because i showed up and the the lady at the church said i think they canceled the meeting
um but as you can see on this um on this design the the fences that that miss white talked about
that fence is about five foot wide and it's just an egress fence and the one on the left
uh is about eight feet wide and that's where the dumpster would be taken in and out of
um it is not adjoining her property um and there's a um i think a two-story structure there
that's next door it doesn't have any windows facing there the entry to that building is on
the far left of that um and like i said we would have the building um the trash secured with a
fence and the property secured with a fence so there wouldn't be any loitering there wouldn't be
any um uh unauthorized entry that way so again all of the all of the design features and critiques
and comments that we've heard we try to incorporate.
And the reason I was able to get a lot of them
was because people like Mr. Solomon
would pick up the phone when I called them
and he would give me his feedback.
From the last meeting, we spoke with Mr. Cromer,
who I haven't talked to about this project in the past.
We've incorporated his comments.
So I've attempted to have meetings
where we can have dialogue about these projects
where we can make incorporate community feedback and the only feedback that i've been able to
to to garner was one at public meetings like this um or with residents that would pick up their phone
or with residents that would pick up their phone.
Thank you.
thank you
German, you also heard testimony, or let me ask you this question.
Did you hear testimony during the last hearing and today alleging either that single family is desirable
or noting that multifamily is not objectionable but questioning the number of units proposed?
Did you hear that testimony?
I did.
And did you prepare an exhibit specifically in response to and to rebut that testimony that either single family is viable or that a lesser number of units is viable?
I did.
I'm going to object because he's referring to the pro formas, which I think is not proper to be introduced into evidence for a variety of reasons that we've already articulated to the board.
So we're going to allow that.
We'll have questions from the board relative to that, and then you'll have a chance to respond
on what you think you need to do to do that. Okay? Okay. All right. Thank you. Please proceed.
Thank you. Thank you. All right, German, I'm going to bring up Exhibit 21. German,
who prepared the document that is shown at Exhibit 21? I did.
And what makes you qualified to prepare a pro forma of this sort?
I've developed over a thousand units over the course of my 20-year career as a real
estate developer in West Philadelphia, and we've exclusively developed in West Philadelphia.
And in your 20-year experience as a developer, is preparing a pro forma of this sort something
that you would do as a matter of course?
Is that something standard that you would do?
Correct.
It's not only a matter of course.
it's typically a requirement to get any loan from a bank. Can you just take a, I'll have some
specific questions, but if you can just take a brief moment and explain to the board what it is
they're looking at here, and then I can ask you a couple of questions. Great. So just kind of tying
this back to the project reclaim presentation or packet that Mr. Masters submitted, there is a page
or two in there that talks about the estimated cost to build some of the single family homes that
the report suggests be built in there. And those are about 12 years old. And these numbers I kind
of took from there, even though they're probably increased a little bit. But even at those numbers
from 12 years ago. What this does is basically break out what a single family home would cost
to build and what it would be marketable at versus how much it would sell for. Then it goes
on to the two units if it was a duplex or triplex or quadplex. And really, it only starts to make
sense at about six units. The building or the three and a half properties that we currently
half. I say half because there was a lot, I'm sorry, an alley that's in between them that
because we were able to acquire all three properties, we're able to extinguish that
alley and make it a part of the property. So out of those three and a half lots, in theory,
if we were to build three individual houses or buildings, it would only make sense at six units
per building to build those. So we would be talking about 18 units. So we wanted to take
into the consideration the density that's required, that the density concerns the neighbors have,
and how can we do this work? So what we did was, if we take six times three, we're getting to 18.
So because this building is four stories tall, it's one building, we're able to use economies
of scale. So we'd have one set of utilities instead of three, we would have one set of
staircase instead of three. And, you know, all of those economic savings allowed us to reduce
the number of units to 16. And that's when that project started to make sense, right? So the only
variance here that we're asking for is the number of units. We were able to design the building that
would conform with every other element of the zoning code, including the height, which is at
38 feet, which is no taller than the building to the right that Ms. White is in. The building on
the left is a two-story building. And when we bought these lots, two of them were vacant lots.
One of them had a house on it that's been vacant for quite some time that we demolished. So now
we have that open space there. And just to kind of dovetail to what Ms. Smith said in her testimony
about traditionally having three units on the block.
three units on the block. We've rehabbed, I would say, two or three of those
We've rehabbed, I would say, two or three of those.
units and converted them into triplexes. And the only reason that those work is because the
building is already existing. There's already a set of utilities there. There is no cost of a
new foundation, a new facade, or any of those things. So the cost to rehab those buildings,
she's correct. It would make sense at three units per building. And that's what we would do.
In the case of a brand-new construction, there are additional costs that you have to bear that do not exist in a rehab.
So just to touch on a couple of specific figures that you have on this pro forma, where do you come to the construction cost at $215 per square foot?
Sure. That's typical standard construction costs in today's environment between the cost of lumber, electrical equipment, the cost of utilities being ran, et cetera.
And how about in your different scenarios here, one, two, and three bedroom? I assume that these are rental figures. Where did you derive these rental figures from which this pro forma is based?
Sure. So we put in market rate units that we typically are, that's the rent that we're currently getting roughly for the units that we currently have in the neighborhood. So it's anywhere from $1,400 to $1,600 for a two-bedroom apartment. And we don't have any three bedrooms, sorry, we don't have any three bedrooms in the neighborhood. So we just guesstimated what they would go for.
And the cap rate at 8%, cap rates can vary. So why is 8% the right number to base this pro forma on?
Sure. So banks calculate cap rates based on risk, right? So a place like Old City or other parts of the city that have lower risk, the bank would be tolerant of a lower cap rate. A higher cap rate would be in more undeveloped areas where there's higher risk, right?
Right. So they'd want to get a higher return on that investment because the risk is just there's a lot of unknowns.
And in this neighborhood specifically, there is a huge unknown in that the new construction has only been limited to six unit buildings or greater.
There have been no buildings that were built as a new construction that are under six units in decades.
Yeah. During our case in chief many months ago, you presented evidence that you self-recorded
an affordable housing declaration on this property. Is that correct?
We did. Yeah. So one of the things that we're super sensitive to is the affordability
of our projects in the neighborhood. We utilize the low income housing bonus in a lot of the
projects as we did in the Parkside Avenue project. So out of those 49 units, six of them would be
deed restricted for 50 years. In this instance, because it's a single family house and it's not
eligible for that mixed income housing bonus, we already recorded a declaration, I think,
authorizing 20% of the units, which is really 25. I think four out of the 16 units would be
deed restricted for, I believe, 40 or 50 years, you know, given that the zoning permit is approved.
So the minute the zoning permit is approved, that deed restriction is automatically activated.
And we wanted to be sensitive to that. So, and we wanted to be consistent with our mission
in providing affordable housing.
You know, we currently have about 300 units
across Mantua and Belmont and in Parkside.
I would think at least 90% of them
have housing choice vouchered tenants in them.
We've been working with the Philadelphia Housing Authority
for at least 15 years in having tenants be,
in having our units be part of that program
and providing, you know, safe, affordable
and stable housing for a lot of those tenants. And to kind of touch back to Mr. Master's recap of
Ms. Gomez's testimony from last time when he said there's, you know, tenants have been
throwing trash and dumping. Ms. Gomez testified that none of those tenants were our tenants,
but they were other landlords' tenants. So we monitor and underwrite our tenants
in a way that is respectful to the neighbors, respectful to the community.
We don't always control their actions, but when it comes to our attention that they are
not being respectful of their neighbors or neighborhood, we take action as our lease
not being respectful of their neighbors or neighborhood, we take action.
provides and as the Section 8 lease provides as well. In light of the Affordable Housing
Declaration, if that is the Affordable Housing Declaration accounted for in this pro forma in
any way? It is. It's accounted for. It is accounted for. So if somebody wouldn't have
recorded that, these numbers would be skewed in the not favorable direction. So even at six units,
it would be tough to make on a market rate level. Got it. I think that my last question for you
is just sort of a broad one. You heard a variety of different testimony over the course of these
two hearings, some of which you've already addressed, impugning your reputation or management
of the properties. If you could address those comments or if there's anything directly related
to that or anything else that you want to just briefly address, please do so. For sure. Thank
you for that. Yeah, so we've been developing in West Philadelphia since 2008. We've been in
Parkside, I believe, since 2014 or 15. The Viola Street neighbors have supported our projects in
the past um and you know at some point they stopped um while other neighborhoods have
continued supporting our projects we've um we've always tried to be a good neighbor and we think
we are good neighbors um on belmont avenue we pay a local group to sweep the street on belmont
avenue um which is around the corner in front of that um large development that that mr harris
brought up and in front of the 21 unit that's across the street from it. We sweep our streets
in front of our properties up and down the block. We take pride in our ownership. If there are any
concerns, all the neighbors have my direct cell phone number. I give it at every RCO meeting.
Ms. Smith, Mr. Harris, Ms. Gomez, anybody in the neighborhood has my phone number and they've
use, that they've called me, they've complained, whether it's, you know, we've started construction
too early, whether, you know, whatever the case might be, I'm always available to hear
people's concerns and address them where I can.
Thank you.
That's all I have.
And that would be the case here as well, you know.
Mr. Masters.
I wanted to share the screen.
Sure. No problem.
Good morning, Chairman. Morning, Mr. Masters.
One of the last things you you testify to is that you are always trying to be a good neighbor.
That's correct. Let's look at the at this email that you sent to
Ms. Smith, Mr. Harris, and Ms. Gomez.
Correct.
Copied with, I believe, was your former lawyer, maybe?
And this is talking about the 4204-06 Parkside Avenue property?
Correct.