Urban revival. Investing in the community, block by block.
After a period where many homes were vacant for as long as 20 years, Baltimore City, also known as “Charm City,” is in a period of revival. This investment opportunity is into the first phase of the Aruka East Baltimore Midway revitalization project which is expected to add to that revival.
The second phase of this project will be additional homes, rentals and condominiums, with an initiative for affordable housing. In its entirety, 1.76 acres is planned to be restored into a mixed income housing community to include single-family homes, condominiums and rental apartments (the “Plan”). The Plan also includes green spaces to include a community garden (0.12 acres), a pet-friendly park (0.34 acres), and six lots on 0.26 acres of land that will be transitioned into a safe and community-oriented outdoor recreational space.
O’Hara Dev QOZF LLC (the “Company”) is focused on development that is in a federally certified Opportunity Zone. The Opportunity Zones program was established by Congress in the Tax Cut and Jobs Act of December 2017 as an innovative approach to spurring long-term private sector investments in low-income urban and rural communities nationwide. The program is based on the bipartisan Investing in Opportunity Act which created a new section of the Tax Code (26 U.S. Code 1400Z-2). The program establishes a mechanism that enables investors with capital gains tax liabilities across the country to receive favorable tax treatment for investing in Opportunity Funds that are certified by the U.S. Treasury Department. The Opportunity Funds use the capital invested to make equity investments in businesses and real estate in Opportunity Zones designated by each state. By investing in the Company, Individuals and business entities can take advantage of favorable tax incentives offered through the seven-year investment opportunity offered.
The first phase of the Plan calls for the rehabilitation of two contiguous blocks (500 and 700) of East 22nd Street (the “Project”).* Twenty-three vacant row houses are planned to be renovated into a total of 32 units to include 15 single family homes, eight rental apartment buildings (16 units), and one commercial unit located on the ground floor. Each single family home is expected to be three- to four- bedrooms with two- or two and half-baths, approximately 2,600 - 3,100 square feet in size, with private and street parking available. Rental apartments are expected to be two-bedroom and two-bath and approximately 1,100 - 1,300 square feet in size. The single commercial unit is expected to be 1,400 square feet.
Single family homes are expected to sell for $300,000 to $350,000. Lease rates for the rental units will range between $1300 and $1400 per month. The commercial unit is expected to rent between $1600 and 1900 per month. See About the Market for further detail.
Already home to two Amazon fulfillment centers and the longstanding national medical incubator of Johns Hopkins University, Baltimore is also now laying the groundwork to become the next East Coast Tech Hub. To support current and future residents in purchsing a home, the city of Baltimore offers a plethora of home-buyer incentives. With the support of city and local programs, O'Hara Development Partners CDC, Inc. has formed a financial and housing counseling program initiative with local organizations and financial institutions to provide future home-buyers with educational resources, counseling support, and a down payment assistance package of up to $43,000. In addition, a ten-year tax-credit is available on some properties that are located in the locally designated historic district of Barclay Greenmount, saving future home-owners an average of $70,000 on taxes over time.
The O’Hara Development Team includes:
- O’Hara Developments, a community development company led by Joanna Bartholomew, the manager of O’Hara Dev QOZF LLC (the “Manager”)
- Lyndsae' Peele, Vice President of O’Hara Developments, MBA, PMEC™ a strategic banking consultant and financial wellness coach.
- Erica Booth, Treasurer of O’Hara Developments, Author, President and CEO of Erica Booth Tax & Accounting Services.
- Thomas Brokaw, architectural designer, project manager, and historic preservationist with over 10 years’ experience supervising multi-million dollar federal/private sector projects.
- NuWave Construction, General Construction, a locally owned business providing real estate development services.
The timeline for the Project is expected to be:
05/01/2021 Marketing begins with offering launch
09/15/2021 Starting date for rolling property closings
10/01/2021 Starting date for rolling construction starts
04/02/2022 First anticipated construction completion
04/02/2022 First tenant/homeowner moves in
Joanna Bartholomew is the CEO and founder of O’Hara Developments, the developer of the Project.
She has combined her years as a Social Worker with her passion for financial education to help individuals reach their level of financial success. As a Licensed Financial Coach, she has specialized in services for business owners, institutional financial management, and families of all income levels to create financial plans of purpose. After years under the real estate arm of her father, Bartholomew Construction, Joanna took her gifts from social work and finance to birth O'Hara Developments, a community development company that focuses on the heart of the people and the quality of their living.
She has taken two graduate degrees in Social Work & Counseling, and her undergraduate degree in Public & Community Health to structure a community development company that intentionally does real estate differently. By hearing the needs of the community first, the O'Hara Project Development Team, is designing a family friendly neighborhood restorative project that is expected to strengthen the quality of living, provide greater access to economic resources, increase home-ownership, attractive rental opportunities, and return green spaces to functional and recreational use.
- Blight to right. Helping to transform a neighborhood
- Re-use. Two blocks of vacant buildings into market rate and affordable housing
- Opportunity for investors. In an Opportunity Zone
- Opportunity for homeowners. Down payment assistance
- Triple bottom line. Offering a return to investors, the neighborhood and the tenants
The Project is situated in East Baltimore Midway, a revitalizing neighborhood in East Baltimore and a federally designated Opportunity Zone. East Baltimore Midway neighborhood began developing in the mid-nineteenth century as a part of Baltimore County. In 1888 it was included into Baltimore City and began to change with the construction of the "belt line" of the B&O Railroad beginning in 1894. Before the end of the century the row houses on the 500 block of E. 22nd Street, those being restored through this Project, had been completed.
The neighborhood is still distinguished by these row-houses, although many sit sadly vacant today. Unused industrial buildings have been converted to dual-purpose artist living and work spaces, and there is new construction infill. The neighborhood is located centrally close to public transportation, Penn Station, Light Rail and the Station North Arts and Entertainment District, an edgy arts district with live venues for diverse musical performances. Both Johns Hopkins University and Hospital, and the historic Baltimore Inner Harbor are approximately ten minutes. In addition the neighborhood boasts two public parks and the amenities of the Cecil Kirk Recreation Center, along with bike, scooter and rideshare. It’s a dense and urban walkable neighborhood, according to WalkScore, and has a population of around 2700 people. There are plenty of bars, restaurants and coffee shops to enjoy.
Single family homes are expected to sell for $315,000 to $370,000 over the next seven years. Per Zillow.com and Trulia.com, the table below provides a list of recent similar sales in the East Baltimore Midway neighborhood or within a one mile radius.
|Address||Date sold||Bedrooms||Bathrooms||Sale price|
|2202 N Calvert St, Baltimore, MD 21218||3/15/2021||3bd||3bth||$320,000|
|2204 N Calvert St, Baltimore, MD 21218||10/7/2020||3bd||3bth||$300,000|
|2616 Guilford Ave, Baltimore, MD 21218||1/19/2021||3bd||2bth||$309,000|
|323 E 20th St, Baltimore, MD 21218||7/24/2020||4bd||2bth||$295,000|
|309 E 31st St, Baltimore, MD 21218||3/5/2021||4bd||3bth||$375,000|
|2624 Guilford Ave, Baltimore, MD 21218||3/31/2021||3bd||2bth||$325,000|
Lease rates for the rental units will range between $1375 and $1630 per month. The commercial unit is expected to rent for $1900 per month. Per Zillow.com and Trulia.com, the table below demonstrates comparative rents for 2-bedroom units of a similar size nearby.
|The Calvert, 1122 N Calvert St, Baltimore, MD 21202||1000 sqft||2bd||2bth||$1,500|
|135 E North Ave #2, Baltimore, MD 21202||1100 sqft||2bd||2bth||$1,295|
|1541 Holbrook St, Baltimore, MD 21202||1300 sqft||2bd||2bth||$1,199|
The Company intends to qualify as a qualified opportunity fund, or “QOZF.” This section summarizes the rules regarding QOZFs and the potential tax benefits for Investors. However, we are not tax advisors. Every Investor should consult with his or her own tax professional concerning an investment in the Company in general and the possible effect of the QOZF rules in particular.
Sections 1400Z-1 and 1400Z-2 were added to the Internal Revenue Code by the Tax Cuts and Jobs Act of 2017. Intended to stimulate economic activity in depressed areas, the rules generally allow investors to defer and even avoid Federal income tax on certain capital gains by investing in areas designated as “qualified opportunity zones.”
In general, a “qualified opportunity zone,” or “QOZ,” is a low-income area that has been designated as such by governmental authorities and approved by the United States Treasury Secretary. As of the date of this Disclosure Document, over 8,000 QOZs have been designated across the United States. The Project is located in a QOZ.
A “qualified opportunity zone fund” or “QOZF” is a corporation or partnership (or an entity, like the Company, that is treated as a partnership for Federal income tax purposes) that holds 90% of its assets in any mix of the following assets:
- Stock of a corporation that is a “qualified opportunity zone business.”
- An interest in a partnership that is a “qualified opportunity zone business.”
- “Qualified opportunity zone business property.”
A business is a “qualified opportunity zone business” if at least 70% of its tangible assets consist of “qualified opportunity zone business property.” ”Qualified opportunity zone business property” means property that is:
- Located in a QOZ;
- Used by the QOZF or the qualified opportunity zone business in a trade or business; and
- The original use of the property began with the QOZF; or
- During any 30 months following the date of acquisition, the QOZF “substantially improves” the property, which means spending at least as much to renovate or improve the property as it paid to acquire it.
The Internal Revenue Service (“IRS”) has clarified that where a QOZF purchases land and improvements, then in determining whether the QOZF has “substantially improved” the property, only the cost of the building is taken into account, not the cost of the land. For example, suppose a QOZF purchases land and a building for $2 million, of which $1,500,000 million is attributable to the land cost and $500,000 to the building. The QOZF will be deemed to have “substantially improved” the property if it spends at least $500,000 to renovate the building during any period of 30 months following acquisition.
Because the Project is located in a QOZ and will be used in a trade or business (the trade or business of building, selling and operating real estate) it will be treated as “qualified opportunity zone business property” if either (i) the original use of the Project begins with the Company, or (ii) within 30 months the Company “substantially improves” the Project. Because the Project is not new, the original use will not begin with the Company. However, we believe the renovations planned by the Company (discussed below) should qualify as “substantial improvements” for purposes of the law.
Thus, the Project should be treated as “qualified opportunity zone business property” and, because the Project will make up more than 90% of the Company’s assets, the Company should be treated as a QOZF, with the attendant potential tax benefits for investors.
Investing in a QOZF can allow a taxpayer to defer and possibly avoid Federal income taxes on capital gains.
Level One Savings: A taxpayer who realizes a capital gain and invests an amount equal to the gain in a QOZF within 180 days can defer recognizing (and thus paying tax on) the gain until the earlier of (i) the date the taxpayer sells his or her interest in the QOZF, or (ii) December 31, 2026.
Level Two Savings: If the taxpayer holds his or her investment in the QOZF for at least five years, he or she can increase his or her tax basis in the QOZF by 10% of the gain deferred, further reducing his or her tax bill.
Level Three Savings: If the taxpayer holds the QOZF for at least 10 years, he or she pays no capital gain tax on the appreciation in the QOZF.
NOTE: As described above, the potential tax benefits associated with investing in a QOZF depend on the individual tax circumstances of the investor. Consult with your personal tax advisors before investing.
The Company is engaged in two simultaneous offerings of its securities: An offering under Regulation CF (where anyone can invest), which we refer to as the “Reg CF Offering” and an offering under SEC Rule 506(c) (where only “accredited Investors” can invest), which we refer to as the “Reg D Offering.”
We plan to use the proceeds of the two offerings, together with a loan from a bank, to use the funds raised to purchase 23 vacant properties, and rehab them into 32 mixed-income units for rent and for resale, in Baltimore, Maryland.
We are trying to raise $600,000 through this Reg D Offering. We will move forward with the Project and use investor funds if we are able to raise at least $150,000 through either offering. If we have not raised at least this minimum goal by December 30th, 2021, we may terminate the Reg D offering and return 100% of their money to anyone who has subscribed.
We are trying to raise an additional $1,000,000 through the Reg CF offering but we will move forward with the Project and use investor funds if we are able to raise at least $150,000 (the “Target Amount”). If we have not raised at least the Target Amount by December 30th, 2021 (the “Target Date”), we will terminate the Offering and return 100% of their money to anyone who has subscribed.
The minimum you can invest in the Reg CF offering is $500 and in the Reg D offering is $5,000. Investments above $500 may be made in $500 increments (e.g., $1,000 or $2,000, but not $756). An investor may cancel his or her commitment up until 11:59 pm on December 28th, 2021 (i.e. two days before the Target Date). If we have raised at least the Target Amount we might decide to accept the funds and admit investors to the Company before the Target Date; in that case we will notify you and give you the right to cancel.
After we accept the funds and admit investors to the Company, whether on the Target Date or before, we will continue the Offering until we have raised the maximum amount.
Investments under Reg CF are offered by NSSC Funding Portal, LLC, a licensed funding portal. Investment under Reg D are offered by NSSC Crowd, LLC.
Total acquisition and development costs of approximately $4,662,000 will be financed with a bank loan of approximately $2,787,000 million. The loan amount is calculated as 75% of loan to project cost, or $3,496,500, less the required down payment of 20% or $699,300 to be raised through this offering.
An additional $900,700 in equity is being raised to cover acquisition costs along with some closing and operational costs. In addition the Sponsor is contributing $275,000 in equity.
O’Hara Dev QOZF LLC (the “Company”) is focused on development that is in a federally certified Opportunity Zone. The Opportunity Zones program was established by Congress in the Tax Cut and Jobs Act of December 2017 as an innovative approach to spurring long-term private sector investments in low-income urban and rural communities nationwide. The program is based on the bipartisan Investing in Opportunity Act which created a new section of the Tax Code (26 U.S. Code 1400Z-2). The program establishes a mechanism that enables investors with capital gains tax liabilities across the country to receive favorable tax treatment for investing in Opportunity Funds that are certified by the U.S. Treasury Department. The Opportunity Funds use the capital invested to make equity investments in businesses and real estate in Opportunity Zones designated by each state. By investing in the Company, individuals and business entities can invest in the Aruka Midway Project through O’Hara Dev QOZF to take advantage of favorable tax incentives offered through the seven-year investment opportunity offered.
Investors are expected to receive an 8.5% preferred annually, to be paid for a maximum of seven years. Investors will also receive 60% of any remaining cash flow generated (after payment of all loans and expenses) either through refinancing or sale of properties. Distributions of the preferred equity raise will begin annually following the buildout year (year 1).
The financing assumptions to purchase and develop the project are as follows:
|Anticipated Project Costs|
The Company plans on selling/refinancing the project in year seven. You can download Financial Projections for more detail.
Under the LLC Agreement, all distributions will be made in the following order of priority, after bank loans have been repaid. Preferred return:
- First, the Available Cash shall be distributed to the Investor Members until they have received their Preferred Return of 8.5% for the current year.
- Second, the balance of the Available Cash, if any, shall be distributed to the Investor Members until they have received any shortfall in the Preferred Return for any prior year.
- Third, at the end of seven years, the balance of the Available Cash, if any, shall be distributed to the Investor Members until they have received a full return of their Unreturned Investment.
- Fourth, 20% of the final balance of Available Cash, if any, shall be distributed to the Sponsor as a Carried Interest.
- Fifth, 80% of the final balance of Available Cash, if any, shall be distributed:
- 60% to the Investor Members; and
- 40% to Sponsor as a promoted interest.
Over a seven year period, the total return to Investor Members, including the return of their initial investment, is expected to be $4,056,368, through an annual preferred return of 8.5%, and return of their initial investment and a share of the project at the end of the seven year period.
The table below summarizes our estimate of how much an Investor would receive for a $5,000 investment made, if repaid in seven years. See the financial projections for more detail.
|Anticipated Return to Investors|
|Preferred return (years 2-7)||$810,798|
|Return of initial investment||$1,600,000|
|60% of Project Profit||$1,640,368|
|Anticipated Return to $5,000 Investor|
|Preferred return (years 2-7)||$2,550|
|Return of initial investment||$5,000|
|Pro-rata share of 60% of Project Profit||$5,125|
|Total Return to $2,000 Investor||$12,675|
A crowdfunding investment involves risk. You should not invest any funds in this offering unless you can afford to lose your entire investment.
In making an investment decision, Investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. These securities have not been recommended or approved by any federal or state securities commission or regulatory authority. Furthermore, these authorities have not passed upon the accuracy or adequacy of this document.
The U.S. Securities and Exchange Commission does not pass upon the merits of any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering document or literature.
These securities are offered under an exemption from registration; however, the U.S. Securities and Exchange Commission has not made an independent determination that these securities are exempt from registration.
There are numerous risks to consider when making an investment such as this one and financial projections are just that - projections. Returns are not guaranteed. Conditions that may affect your investment include unforeseen construction costs, changes in market conditions, and potential disasters that are not covered by insurance. You can download a more expansive list of potential risks associated with an investment in this Company here.
Unless otherwise noted, the images on the offering page are used to convey the personality of the neighborhood in which the project is planned. Properties shown in these images are not included in the offering and Investors will not receive an interest in any of them.
The duration of the Covid-19 pandemic and it’s exact long-term effects on the world is still unknown. From its onset, the United States of America reached unemployment levels not seen since the Great Depression. Some have already estimated more than 20% unemployed. We are experiencing the impact of this on construction, which has become more expensive, and lease-up and rental activity which may increase as construction costs and home purchase prices continue to go up.
Some potential impacts include:
- If there is another surge in COVID cases, the supply and/or delivery of construction material may slow down, which can result in an impact on the preferred timeline of completion.
- Material prices have already begun to increase and are expected to be at a higher cost through 2022.
- For some potential homebuyers and renters, economic uncertainty may cause them to hold off on making major life decisions at this time. However, the O’Hara Partners Housing & Financial Counseling Program provides guidance, education, and down payment assistance up to $43,000 to remedy some common concerns.
- Our construction project may be delayed (but most likely not canceled) as a result of the impacts of COVID-19 on the companies and governments that have partnered with us.
- Possible supply chain bottlenecks of equipment and materials — including structural steel and glass from Asia — could cause further project delays, or reduced spending on future costs.
At the same time, the construction industry is considered to be essential, and significant protocols have been put in place to protect workers. Government stimulus actions have and may continue to throw a lifeline to this project — via a package of tax benefits, COVID relief funds, or direct cash disbursals — making the situation more tenable for our subcontractors.
Baltimore City is making COVID testing, vaccinations, and the impacts of the pandemic a number one priority. There are limitations on large gatherings and social distancing, and wearing a mask continues to be strongly encouraged. through various health campaigns. Financial institutions are providing construction loans, and traditional home mortgages are readily available at record low interest rates. Many state and local programs have also been created to support development initiatives similar to Aruka Midway.