Deanwood Station

A project for everyone in this neighborhood on the rise.

About the Project

Deanwood Station, LLC (the “Company”) is the managing partner of a ground-up project to be developed, owned and operated by Deanwood Equitable Enterprises, LLC. The site is located at 4276 Sheriff Road, a 10,238 square foot vacant lot in the Deanwood neighborhood of Washington, DC (the”Property”). Deanwood is listed by the Washington D.C. Economic Partnership as a key emerging corridor and opportunity zone in the District.

According to Redfin, Deanwood is one of the hottest neighborhoods in the nation. After a 20-year slump, and with housing prices skyrocketing across the city, the larger single-family homes in this neighborhood are enticing to buyers. There is easy access to the neighborhood with its connections to the Anacostia Freeway Route 295 to the North and West and two major thoroughfares to the East and South (Highway 214 and Route 704). And there are three metro stations within two miles making transportation an asset for the community.

This mixed-income community is filled with generational pride and knowledge. Housing is a mixture of detached homes, row houses, and rental apartment buildings. There is a STEM High School and Marvin Gaye Park with a trail that stretches down to Virginia. There are also several retail shops that provide day care, drycleaner, fast food, and convenience shopping (7-11 and mini-mart) services. Two things are missing. A grocery store and affordable for-sale housing. The Project will be the first to provide both of these in amongst the considerable amount of new construction in this area over the next few years.

The Project fits right in with the neighborhood’s growth. A ground up project on vacant land, the Company plans to build a mixed-use project. A mix of uses is planned for the site, including a for-sale condominium building with 13 condominium units, commercial space for a small grocery store, a co-share office space and corporate headquarters for the Developer (the “Project”). The co-share office space will be dedicated to local nonprofits and minority businesses, while the local grocer will offer fresh food filling the void in this food desert. The closest grocery store is currently 2.2 miles away. When complete, the Project will have approximately 6,800 square feet of ground level retail which will be available for triple net lease at a market rent averaging $25 per square foot with the potential to increase to $32. 
 You can review this exhibit for comparable rents in a neighboring commercial corridor.

The Greater Deanwood neighborhoods recently completed a soon-to-be released  10-month study for a new small area plan. Three sample neighborhood goals and key strategies identified include:

  • Supporting two pilot for-sale condo buildings with the goal of increasing homeownership and community ownership of land.
  • Establishing technical assistance “outposts” to provide tailored support to entrepreneurs, especially minority-owned and women-owned businesses.
  • Providing support for residents and community members to build and grow a permanent, diverse food ecosystem owned by community members (e.g., locally owned grocery stores, food cooperative, urban agriculture, community gardens etc.).

The Project addresses these goals through its development strategy, and by focusing on creating an environment for entrepreneurs to establish and grow their businesses in spaces that rent for less than market rate, thereby improving their chance for success. It is hoped that a natural collaborative ecosystem will emerge in the shared environment that is planned, organically bolstering networking among vendors and office tenants.

The Project also hopes to address unemployment in the area which is currently between 13% - 18%. During construction the Project is estimated to create 55 construction jobs with the average construction salary of $15 per hour and senior construction workers making $65 per hour. In addition, the Project is expected to create 15 permanent full-time, and two part-time jobs once operational, with salaries ranging from $50,000 to $110,000 annual. Positions include four grocery store employees, six full-time and one part-time staff members to be added to the Manager’s team and five full-time and one part-time employee to run the co-share office space.

The Property is zoned MU-3A according to the DC Department of Planning, permitting the planned uses. The floor area ratio for the parcel is 1.2 which makes the gross total buildable square feet 12,286.

The Project is slated to begin construction in November of 2021 and to be completed by December of 2022, and is expected to follow the below timeline:

04/13/2021    Acquisition Closing
04/13/2021    Sign LOI with grocery tenant ($25 per square foot)
12/31/2021    Construction Finance Closing     
10/13/2022    Substantial Completion/Condo Sales Start
01/13/2023    Retail Spaces open
02/13/2023    Condo Sales Complete

The Manager has selected a local, and experienced, team to begin executing on the Project beginning in April after closing on the Property. They are:

Glenn Hudson – Development Consultant 
Michael Weincek - Architect 
Don Bernards – NMTC Accounting Firm 
Brunson Cooper – Lead GC 
Scott Bornman – Partner GC 
Anitra Androh - Legal 
Howard Smith – NMTC Consultant

Take a 3-D conceptual virtual tour of interior of a condominium here.

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The project site
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About the Change

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About the neighborhood

Deanwood is one of the oldest neighborhoods in Northeast DC. Originally it was home to the city’s only amusement park and a host of other amenities like the Strand Theater, the Nannie Helen Burroughs School, and Marvin Gaye Park. From 1960 to 2015 Deanwood was isolated from amenities and services enjoyed by other parts of the city. Stagnant for over 20 years, it has now become one of DC’s fastest growing neighborhoods.

The NE end of Ward 7 (“Ward 7”), where Deanwood is located, covers about two square miles or 1,282 acres and has a population of approximately 24,000 or 29% of Ward 7’s total population and three percent of DC’s total population. Ward 7, and Deanwood in particular, are recognized for being the oldest, longstanding Black community in DC. Today, Deanwood’s population is 95% Black compared to an overall 46% Black population in DC. Greater Deanwood’s projected population growth is on par with DC (1.4% versus 1.76% between 2015 and 2025) as are homeownership rates (41% in Ward 7 versus 42% in DC). However, in Ward 7 renters are spending more than 35% of their income on rent. They would save by becoming homeowners.

Home values have skyrocketed even in the Greater Deanwood neighborhoods over the past two years with no slowdown in sight. Additionally, home prices in Greater Deanwood are projected to outpace DC overall in 2021 (11.1% versus 9.2%). The price of homes has increased by 25% year-over-year, and sales are averaging 2.1% over asking price. The proposed condominiums will be listed at $315,160 which is below the market average. The Company expects the three-bedroom condos to sell within six months of listing.

Additionally, there are two major rental developments going up within a quarter mile. To the South, the Strand theater is being repurposed into a well-known grocery store called Ivy Smokehouse. 86 one and two-bedroom apartments are planned to be built on top of the Strand, available for those making under 60% AMI. To the East is a new construction building of 63 one- and three-bedroom rentals for those making under 50% AMI, and also including 5,500 square feet of retail space.

The educational attainment rate of the residents 25 years and older in Ward 7 is slightly lower than the rest of DC, with nearly 91% of residents high school graduates in DC versus 86% in Ward 7, and 58% college graduates in DC versus 18% in Ward 7. Over time this disparity equates to lower wages and a decreased ability to own a home.

The median household income for residents in Ward 7 is $41,77, compared to $82,604 for households across DC. The unemployment rate for people 16 and older in Ward 7 (15.7 percent) is almost double that of DC (7.4 percent).
Sheriff Road, on which the Property is situated, consists of a mix of residential and commercial uses. Kenilworth Avenue, 1.6 miles from the Property, and Nannie Helen Burroughs are the busiest roads nearby. Approximately 127,300 vehicles travel along Kenilworth Avenue on a daily basis and another 12,200 on Nannie Helen Burroughs.

To analyze the local demographics near the Subject property, ESRI drive time statistics were calculated using a two-, five-, and ten-minute radius. The purpose of this analysis is to examine the buying power of households within this community, in addition to spending preferences.
Based upon the annual expenditure of the residential population and the gap in the retail market, the current retail offering in the community is insufficient to provide all of the needs in the community. Considering that 51 new households (within a five-mile driving radius) are expected to move into the immediate area annually through 2025, more food retail is needed to sustain the population growth.

This information was supplied in an Economic Impact Study conducted by AreaProbe.  You can download the report here.
 

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About the Neighborhood
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About the Developer

Thomas Houston is the Executive Director of Medici Road, the manager of Deanwood Station LLC and the developer of the Project. His primary mission is to increase Black home ownership through the development of affordable and workforce live/work properties that can be a model for other urban areas. He led Medici Road in redeveloping its first three single-family home redevelopments. These developments, 232 Division Ave, 277 Newcomb St, and 919 46th St employed a successful strategy of providing housing opportunities to those who need them most, by employing a 2-week exclusive listing period for existing neighborhood residents, first responders and educators. Thomas was a corporate brand manager before he switched to working in government and nonprofit sectors. He has used the skills he acquired in consumer behavior to design evaluation tools and programs that empower residents and government officials to make different decisions in how they work to solve poverty. Thomas is also trained in developing racial equity curriculum which he embeds into his programming. He uses these skills to model pro formas, design community plans, and bring the right partners together to execute a community development vision. 
Thomas has a BBA in marketing from Howard University and an MBA in marketing from Penn State University.

Talayah Jackson, Vice-Chair of Medici Road’s board, is the founder and CEO of Relativity Property Development, a burgeoning real estate development company located in Washington, D.C. that focuses on community-driven development and revitalization in all communities East of the River (eOTR).  Talayah is a certified project manager and in her professional career, has spent much of her time advising community-based organizations (CBOs), healthcare providers, and government agencies on the development and implementation of population health improvement programs. She is now applying that experience to create and improve the design and operation of the built environment to promote optimal health and wellness. Talayah has a BA in public policy from the University of North Carolina at Chapel Hill, a Master of Public Health from Emory University, and an MBA in organizational management from Georgia State University. Talayah supported the newest development in Deanwood, a 63-unit affordable rental project, by supporting the community engagement process and helping Deanwood civic association negotiate a community benefits agreement. She has completed several single-family developments and executed community engagement strategies.

Medici Road helps organizations think differently about the programs and products they develop. We mine data and use it to design programs and products that can be used to fight poverty RIGHT NOW. Affordable and workforce housing is our largest product. Medici Road was launched by Thomas Houston in 2016 as a vehicle to stop generational poverty by connecting the dots between housing, education, and public health.

Medici Road’s very first housing product was a mortgage calculator which calculated free mortgage down payment funds available to buyers, in order to increase their buying power. But even with 100% of down payment money, buyers were still being outbid by escalation clauses. It was then that we decided to launch our own development arm in order control pricing and in order to promote entry-level home ownership.

Medici Road launched their development portfolio with a ten-year plan that started with single family homes. They have now entered into year one of a five-year plan to produce five mix-use developments in the Deanwood area that are connected to five determinants of health. Deanwood Station will be the first project with a focus on food in the commercial space.

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About the Offering

The Company is engaged in a Regulation Crowdfunding (Reg CF) offering (the “Offering”) to raise money for a ground up, mixed use real estate project to be built at 4276 Sheriff Road, a 10,238 square foot vacant lot.

We are trying to raise a maximum of $700,000, but we will move forward with the Project and use investor funds if we are able to raise at least $100,000 (the “Target Amount”). If we have not raised at least the Target Amount by July 31, 2021, EST (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 Offering is $500. Investments above $500 may be made in $500 increments (e.g., $1,000 or $1,500, but not $756). An investor may cancel his or her commitment up until 11:59 pm on July 29, 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.

You can review the disclosure packet including Form C on the SEC website where it is registrered, or download it here.

Investments under Reg CF are offered by NSSC Funding Portal, LLC, a licensed funding portal.

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Key deal points
  • Affordable housing. Condos at below market sales prices.
  • Fresh food. A grocery store in a food desert.
  • Small business support. Creation of a co-sharing space focused on nonprofits and minorities.
  • Focus on homeownership.  Building wealth through homeownership.
  • Neighborhood on the rise.  One of the hottest neighborhoods in the nation.
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About the finances

Total acquisition and development costs of approximately $11,071,129 million will be financed with a bank loan of approximately $6,990,389 million for acquisition and construction, New Market Tax Credits (NMTC) of around $3,217,500 along with equity totaling approximately $863,240, which includes the equity raised through this Offering.

Construction is expected to be completed in the first year (or 2022) and condo sales totaling $3,960,400 in the second year, which will be used to pay down construction loans. The Company also expects the commercial space to be fully leased and occupied by the end of the second year, which it will continue to own and operate, and which is expected to yield Net Operating Income (NOI) of $53,569 in its first year of operations, climbing to $67,859 by year 10.

The Manager is also pursuing additional grants such as the Federal Home Loan Bank Atlanta's Affordable Housing Program, the Neighborhood Prosperity Fund and Ferguson which will strengthen the project finances.

The Company intends to use the New Markets Tax Credit (“NMTC”) program financing to develop the Project. The NMTC program is administered by the Community Development Financial Institutions Fund of the U.S. Treasury (“CDFI Fund”) and provides a 39% federal tax credit to investors who make qualified equity investments (“QEIs”) in a qualified community development entity (“CDE”). The tax credit is claimed over a seven-year credit allowance period. CDEs are privately managed investment institutions that are certified to make certain investments based on the CDFI Fund’s regulations. Each NMTC transaction has an investment fund to affect the financing arrangement.

This is how it will work: The Company’s affiliated entity anticipates borrowing funds from City First Enterprises and lending those funds to the investment fund. Then we expect U.S. Bank, the sole investor in the NMTC transaction to invest its money in the investment fund. The investment fund will then contribute the funds from the loan and U.S. Bank’s investment to a CDE – in this case Deanwood Equitable Enterprises, LLC, the owner of the Project. This entity will in turn, make loans to the Company to assist with financing the Project. Only Deanwood Equitable Enterprises, LLC is entitled to substantially all of the benefits derived from the NMTCs. NMTCs are subject to 100% recapture for a period of seven years as provided in the Code.

The Project requires approximately $863,240 in total equity and the Sponsor has invested $163,240 of this. We hope that Small Change Investors will contribute the remaining $700,000 through this offering. Because the project will use NMTC financing, as described above, it is anticipated that investor funds will be returned at the end of seven years.
The financing assumptions to purchase and develop the project are as follows:

Anticipated Uses  
Land Acquistion $1,138,242
Construction $4,617,935
Permits/testing $159,291
Utilities/Bonds $236,000
Professional Fees $928,544
Developer Fee $1,575,000
Insurance and Taxes $152,800
Finance $1,688,737
Legal/Marketing/Other $506,463
Reserves $68,117
Total Uses $11,071,129
   
Anticiipated Sources  
Construction Loan $6,990,389
Equity - New Market Tax Credits $3,217,500
Equity - Sponsor $163,240
Equity - Small Change Investors $700,000
Total Sources $11,071,129

For more detail please review the more detailed project budget, sources and uses and the operating pro-forma.
 

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About the return

Under the LLC Agreement, all distributions will be made in the following order of priority, after bank loans have been repaid: 

  1. First, the Available Cash shall be distributed to the Investor Members until they have received a Preferred Return of 9% for the current year.
  2. 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 of 9% for any prior year.
  3. Third, the balance of the Available Cash, if any, shall be distributed to the Investor Members pro-rata in accordance with their percentage interest share of Unreturned Investment until a total of $500,000 has been returned to all Investor Members.
  4. Fourth, the balance of the Available Cash from sale or refinance proceeds from the commercial portion of the project, if any, shall be distributed:
    1. 45 % to the Investor Members; and
    2. 55 % to Sponsor as a promoted interest.

The Sponsor expects to begin payments about the sale of all condominium units, or the end of year two, whichever comes first.

Investor Member returns are capped at a maximum multiple of 2.6 x the amount they invested. While Investor members may still maintain ownership in Deanwood Station LLC, they will no longer receive a return after reaching this cap. In other words, an investment of $1,000 may return a maximum of $2,600 including the original investment amount. The table below illustrates our estimate of how much an Investor Members may expect back under two scenarios, either a 6% market cap rate or a 6.5% market cap rate, if repaid in seven years.

Anticiipated Return CAP Rate 6%   CAP Rate 6.5%  
Net Operating Income, year of sale.   $62,101 $62,101
Capitalized Value $1,035,011 $955,395
Less Loan Fees ($20,700) ($19,108)
Net Value $1,014,311 $936,287
Refinancing at 80% LTV $811,449 $749,030
Current Balance on Loan ($528,324) ($528,324
After Refinance Cash Available $283,125 $220,705
45% Investor Member Profit Share $127,406 $99,317
     
Anticipated Return to Investors    
Initial Investment Returned $700,000 $700,000
9% Preferred Return $234,000 $234,000
45% Profit Share $127,406 $99,317
Total Returned $1,061,406 $1,033,317

Under these two scenarios, if you invest $5,000 you may expect $7,582 or $7,381 back.

Caution:  This table is merely an illustration based on current assumptions and estimates as of the date of this offering and may change at any time based on market or other conditions and may not come to pass. All investments carry risk of loss and there is no assurance that an investment will provide a positive return. Many things could go wrong with this offering, including those listed in this more detail Risks of Investing document.
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About the risks

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.

Additional statement

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 more detailed Risks of Investing here for a more expansive list of potential risks associated with an investment in this Company.

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.

Covid-19 disclosures.

We do not know how long the pandemic will last or how its effects will ripple through the American economy. With unemployment that reached levels not seen since the Great Depression and interrupted business operations, and with no certainty on the end of the pandemic as yet, we may experience a number of negative effects from the COVID-19 pandemic:

  • If there is another surge of cases, the construction supply line may slow down, impacting our ability to complete construction on time.
  • Material prices have continued to climb but are expected level out by early 2022, when the Company expects to begin construction.
  • Economic uncertainty may cause some families to postpone buying a house and rent instead, decreasing the pool of potential buyers for our condominiums.
  • The pandemic has caused significant uncertainty in the value of many assets, including real estate. Until the uncertainty is resolved it might be difficult for us to borrow money or raise capital by selling equity.
  • With restrictions on operations of businesses, it may be difficult for both our grocery store and office-share space to function, and therefore difficult for them to pay rent. A reduction in cash flows and/or asset values may impact our business in undetermined ways.

Many businesses have shut down due to COVID. Many of the closures have been government mandated. Banks strengthened their lending practices due to COVID risks; particularly on projects with a commercial component. There is always a risk of history repeating itself on this project.

The District of Columbia has been proactive in protecting residents and businesses from the economic effects of COVID-19. They have been careful in keeping large gatherings to a minimum. Simultaneously, the construction industry was deemed essential and extra protocols were put in place to protect workers in the industry. Banks have also begun to lend again. Community Development Financial Institutions (CDFIs) in particular are focusing on supporting projects in key neighborhoods such as Deanwood.

Additionally, home sales and prices have continued to climb between Q1 2020 through Q1 2021. While the home-owner market in DC is not recession proof, a shortage of housing products has ensured a robust sales market.

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Follow the change.