Savers Village

Work-force housing designed to turn tenants into home-owners.

About the project

Savers Village is a work-force housing project with a twist. While its primary goal will be to house families affordably, Savers Village (the “Project”) will offer those families a pathway to financial independence and home ownership. Each tenant will have a brokerage savings account established in their name into which the Landlord plans to deposit 10% of their rent payment each month. Accounts will be managed by DS Real Estate Investors (the “Manager” or the “Sponsor”).

The Sponsor is seeking partners that share our goal of social impact that produce two outcomes: a good financial return and positive social change.

Total Project acquisition and development costs of approximately $7,160,000 will be financed with a bank loan of approximately $5,010,000 (70% LTV), grants and tax credits of around $1,500,000, Sponsor equity of $50,000 and the $600,000 raised through this Offering. In the third year after the Project is stabilized, the Company expects to pay down the acquisition and construction loan with a permanent loan of approximately $5,743,000 million.

An 8% annual preferred return is being offered to Investor Members plus 25% of net cash flow. We expect to refinance the Project in the third year of operations. Concurrent with this refinance, we expect to repay the majority of the equity invested in year 3 and the remainder in year 4. Returns will be paid on a periodic basis quarterly. See ‘About the Return’ for more detail.

The Project is slated to be a four-story new construction multifamily building with 39 apartment units, community room, office space and laundry room. It will be built in Newark’s West Ward on three currently vacant parcels of land, at 112-118, 120-122 and 124 North Munn Avenue, Newark, New Jersey, 07106 (the “Property”).

Addresses Size Square feet
112-118 N. Munn Avenue 100 x 150 15,000
120 N. Munn Avenue 52.6 x 150 7,890
124 N. Munn Avenue 20.3 x 150 3,045
Total   25,935

The Property is in the West Ward, Lower Vailsburg section of Newark. Vailsburg has a significant stock of Dutch Colonial and Victorian inspired homes, mostly built between 1945 and 1947, making the architecture unique to the area. And it is also proximate to two large parks, Vailsburg and Ivy Hill Parks. The Property borders East Orange, New Jersey and is approximately two miles north of Seton Hall University in South Orange. The location is adjacent to South Orange Avenue, a major road that leads into Downtown Newark and Newark Penn Station and is close to the Garden State Parkway New York City which is approximately 15 miles away and easily accessible by car, bus, or rail from the location. According to Walk Score, the location is very walkable (most errands can be accomplished on foot) with many nearby transit options. 

The Sponsor is currently under contract with the City of Newark for the land. The purchase price is $155,610 ($6 per square foot). The sale of the property is conditional for use as an economic development activity. While not located in an Opportunity Zone, it is expected that project will qualify for other federal, state, and local incentivized designations.

The timeline for the project is anticipated to follow the timeline  outlined below. The timeline may need to be adjusted and or extended due to unforeseen factors. 

Deliverable  Time Frame
Investors for land acquisition secured and land acquired 4th Q ‘20 -1st Q ‘21
Agreements with development and organizational partners executed 1st Q ‘21 - 2nd Q ‘21
Zoning Changes Approved 2nd Q 2021
Equity and debt instruments secured for pre-development 1st Q/2nd Q 2021
Environmental phase 1 and civil engineering/site plan 2nd /3rd Q 2021
Architectural Drawings/Construction Drawings 3rd Q 2021
Construction financing completed 4th Q 2021
Construction commenced 1st Q 2022
Start Leasing Units 4th Q 2022
Construction completed and certificate of occupancy obtained 4th Q 2022
Construction financing converted to permanent financing 2022-2023
Investors Payment Commence 2023-2024

The Sponsor has assembled a powerful team of Black entrepreneurs to accomplish this project. They include:

Project Architects - Mark Bess, VP at Netta Architects.
Engineering & Construction Management - Brian Grant principal of Grant Engineering, structural and civil engineers and construction management.
Real Estate Developer - Patrick Terborg, managing member of TD Partners.  
Real Estate Development Consultant - Frank Robinson, managing partner of the Kairos Development Group. 

The Axcel Capital Group is acting as financial broker and the Sponsor is partnering with the New Jersey Coalition for Financial Education to provide financial education. Their program is designed to provide at least six adult financial literacy courses per year. Courses will be held on the Property in the common room or through electronic mediums.

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About the developer

DS Real Estate Investors, LLC, the Sponsor and Manager of the Company, is  a real estate investment firm specializing in property rehabilitation of distressed housing and the revitalization of urban communities., led by Darryl Scipio.

Darryl was born in Washington DC and moved to New Jersey with his rockstar parents at the ripe old age of two. He graduated in the top 10% of the greatest high school on the planet – St. Benedict’s Prep in Newark NJ. Activities: track team, tennis team (Captain), and the drama guild (he can act). He has two phenomenal younger sisters who he looks up to.

College? Yes – Rutgers where he won the Paul Robeson Award and was a columnist in two student newspapers. He was deeply involved in community and student activism here. He graduated with dual bachelor's degrees in Political Science and Africana Studies.

His first jobs were in the dot-com industry and the publishing industry. He was on web teams at Agency dot com, CNN, Blackplanet and Mercedes Benz. He listened to music and wrote words about it for VIBE, STRESS, and XXL. One day, he plans to be a writer.

He has been an entrepreneur since his early twenties and started DOS Media, a technology consulting company. The company focused on building websites for nonprofits, elected officials, and government agencies.

Darryl received his law degree at Rutgers Newark, where he completed a summer abroad in Capetown, South Africa, was elected President of the Association of Black Law Students, won a fellowship to attend the Eagleton Institute of Politics for one year, and was a student attorney in the Community Law Clinic. After graduating, Darryl joined the ACLU of New Jersey, running the Racial Justice Program. Darryl is admitted to practice law in the State of New Jersey.

He’s a rabble rouser so he spent the next few years working in the labor movement with 32BJ SEIU. He met his beautiful wife Erika here.

Currently, Darryl practices real estate and business law, and is an adjunct professor of Humanities at Essex County College and is starting his next career as a real estate developer.

Darryl started a nonprofit in law school – the Newark Chess Club – a mentorship program that teaches life skills through the game of chess. What started as a volunteer project for shits and gigs is now operating in 40 schools and has 20 chess instructors. He recently launched Success With Chess to offer the program outside of Newark. www.successwithchess.com

Darryl lives with Erika and their twins Bijoux and Toussaint in East Orange NJ.
 

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About the change

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About the building

The Sponsor has incorporated Savers Village, LLC (the “Company”) to develop the Project. The Company is currently in contract with the City of Newark for the land. The purchase price is $155,610 ($6 per square foot). The sale of the property is conditional for use as an economic development activity.

The gross area of the 39-unit residential building as planned is approximately 52,018 gross square feet, with net leasable space of 47,118 square feet. Unit configuration and rent schedule is expected to be as outlined in the table below:

# of units Unit type Sq ft Rent per month Rent per s.f. Savings per month
15 1 bed + 1 bath 900 $1,000 $1.11

$70

15 2 bed + 1 bath 1,050 $1,300 $1.24

$91

9

3 bed + 1 bath 1,200 $1,500 $1.25 $105

Limited parking will be available on the Property and will need to comply with City of Newark guidelines. Designated parking spaces will not be provided for every unit as the Company anticipates that many tenants will not own cars and will use public transportation instead. As mentioned previously, this is a very walkable location with many transportation options.

Units are planned to have features including high ceilings and private patios. In addition outdoor amenities and laundry facilities will be available on the Property to all tenants, along with a community room, gym, and rental office for property management staff.

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About the project
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About the Impact

The Company plans to provide market rate apartments to families that hope to achieve financial independence. The lease will encourage all tenants to remain as tenants for a minimum of 3 years but optimally 5 years say that they accomplish their optimal saving targets. During that period, the landlord will make an optional voluntary contribution from the tenant’s monthly rent to a savings account, held jointly in the name of the tenant and the Company. For example, if the rent is $2,000.00, every month 10% or $200.00 would be deposited in the FDIC insured bank account.

Each tenant will be required to attend monthly financial literacy classes, conducted by a non-profit agency in collaboration with an established financial institution. The Sponsor will partner with a brokerage firm in order to provide services that minimize risk.

The table below provides an example of a tenant savings account, calculated for a tenant who leases a unit at Savers Village for five years. Increases in savings coincide with annual anticipated increases in rent.

Year of tenance Savings per month Annual set aside
One $200.00 $2,400,00
Two $236.00 $2,832.00
Three $238.52 $2,862.24
Four $241.21 $2,894.52
Five $244.10 $2.929.20
Total saved   $13,917.96

How will we accomplish this?

The Company intends to select low risk investment options to best ensure that some level of return will be provided to tenants. These potential investment options include index funds and mutual funds held in trusts and ROTH IRA accounts.

The Company also plans to partner with The New Jersey Coalition for Financial Education to provide financial education to all tenants. A program has been designed to provide at least six adult financial literacy courses per year. Courses will be held on the Property in the common room or through electronic mediums. Residents will sign agreements at the time of move-in agreeing to their required participation in the program. The Company’s nonprofit partner, Community Urban Renewal Enterprises, led by Francis Gilliard, will provide case management and assistance for residents who experience challenges with jobs or a delay in making rent payments which may in turn impact their saving contributions

The Company plans to also engage Turning Pointe Financial to manage the brokerage and savings for the client and to help develop policies for fund management. A rental criteria six-point checklist will be developed to align with applicable Federal, State and Local regulations and is expected to include;

Advertising. The Company will target outreach to partnering organizations, maintain a website and an active social media presence.

Initial Rental criteria. Each applicant will be assessed through an inclusive checklist. Planned checklist items include fairness and objectivity, awareness of potential discrimination accusations; expectations that the rental property will be treated with care; expectation that rent will be paid on time; expectations that each tenant will participate in the savings program and expectations that each tenant will follow property rules, processes, and procedures.

This checklist will be shared upfront with each prospective tenant. We’ll do our best to help each tenant exceed the minimum criteria.

Pre-Screening. Applicants will advance to a formal interview focused on their residential needs and saving goals.

Application. Once initial and pre-screening are complete prospective tenants will be invited to submit a full application.

Screening & Background Check. A credit and background check will be performed to provide information that will allow us to better understand potential residents’ history and ability to participate in the program. Criteria to be considered includes any outstanding debt; past delinquencies on rent or utility payments, prior evictions, legal actions and bankruptcies.

References. The final step will be a reference check on prior living arrangements. At least three references from prior landlords will be required and in some instances, personal references to ensure the tenant is a good fit.

The Sponsor envisions being a part of an ecosystem that helps the residents of Greater Newark become economically self-sufficient. The overall objective is to provide a platform that will provide quality rental housing and meaningful financial education. The ultimate aim is to help residents save toward goals that will change their lives as well as the lives of the communities they live in.

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About the market

Newark, the largest city in the State with a population of 280,463, also has the 10th highest poverty rate in the State at 28%. Median household income is $35,181, and the population is heavily skewed towards Black (47%) and Hispanic (39%) residents and only 9% of the population is white.

The Savers Village Model aims to help improve these statistics by providing needed resources to this community. Our model focuses on the triple bottom line - both a financial return and a social return are created through a housing model that builds partnerships to solve community problems.

Savers Village will target renters and families that meet Workforce Housing thresholds for the state of New Jersey and have a sincere desire to improve their financial standing and purchase a home.

Participants can be individuals or families of four or less. Priority will be given to those that demonstrate that they are capable and willing to participate in the savings portion of the program. All criteria will meet HUD guidelines for Low (80% of Income Limits) or Extreme low (50% of income limits) income. The preliminary low-income income limit for a 4-person family is $78,500, while the very low-income income limit for the same family size is $53,000.

Newark has a majority of rented homes, with 77% renters versus 23% owner-occupied housing. As of June 2020, the average rent for a 1-bedroom apartment was $1,288, and the average rent for a 2-bedroom apartment was  $1,850. The average rent in Lower Vailsburg, where the Project is located, is $1,625.
Rents planned for the Project are competitive with one-bedroom units at $1,000 per month, two-bedroom units at $1,300 per month and three bedroom units at $1,500 per month including heat.

Newark Amenities 

The nation's third oldest city, Newark is one of the leading historic spots in the Northeast, renowned as the most culturally affluent region in New Jersey. While smaller than nearby New York City, just a few miles and a few minutes away by car or public transportation, Newark has a lot to offer. The City is a regional, national and international transportation hub with seaport, rail, and air connections plus abundant public transportation. It is divided into five wards—Central, East, North, South, and West—and each of them hold their own charisma.
Newark is a diamond in the rough ready to come into its own. It is home to the New Jersey Performing Arts Center, the Newark Museum of Art, Branchbrook Park, and the Cathedral Basilica of the Sacred Heart. 

The site itself is within walking distance of many essential amenities including East Orange General Hospital, Vailsburg Park, and Elmwood Park. There are numerous public transportation options on South Orange Avenue and Central Avenue, just a few steps away. In one hour, via bus plus train, you’re in the heart of New York City. Dozens of local shops are located close to the site and the entrance to the Garden State Parkway is less than a mile away.

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Key deal points
  • Affordable. Workforce housing development.
  • Building wealth. Providing a path to home ownership for tenants.
  • Blight to right. Helping to transform a neighborhood.
  • Scalable. Building a replicable investment model.
  • Triple bottom line. Offering a return to investors, the neighborhood and the tenants. 
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About the offering

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 additional investor capital and a loan, to build a 39-unit workforce housing project at 112 - 124 N. Munn Avenue in Newark, New Jersey.

In an offering under Regulation CF the Issuer is required to state a “Target Amount,” meaning the minimum amount the issuer will raise in the Regulation CF offering to complete the offering. For the reason just described, our Target Amount for the Reg CF Offering is $1,000.

We are trying to raise a maximum of $600,000, but we will move forward with the Project and use investor funds if we are able to raise at least $200,000 (the “Minimum Amount”) by May 1, 2020. If we haven’t, both offerings and all investment commitments will be cancelled, and all committed funds will be returned.

The minimum you can invest in the Reg CF offering is $1,000, and the minimum you can invest in the 506 (c) offering is $20,000. Investments above the minimum in both offerings may be made in $100 increments (e.g., $1,100 or $1,200, but not $1,136). An investor may cancel his or her commitment up until 11:59 pm on April 29, 2020 (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.

The SEC is considering other changes to Reg CF, in addition to raising the maximum offering amount. Where applicable, we will reference possible changes in the applicable sections of this Form C.

You can download Form C and accompanying disclosure documents here. Or you can find them as registered on the SEC site here

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

 

 

 

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About the finances

Total Project acquisition and development costs of approximately $7,160,000 will be financed with a bank loan of approximately $5,010,000 (70% LTV), grants and tax credits of around $1,500,000, Sponsor equity of $50,000 and the $600,000 raised through this Offering. In the third year after the Project is stabilized, the Company expects to pay down the acquisition and construction loan with a permanent loan of approximately $5,743,000 million. (See table below). 

Project costs % of total  
   Land purchase 2.4% $170,000
   Soft costs 8.4% $600,000
   Financing 5.2% $370,000
   Construction 84.1% $6,020,000
Total project costs 100% $7,160,000
Sources    
   Small Change investors 8.4% $600,000
   Sponsor equity 0.7% $50,000
   Construction loan 70.0% $5,010,000
   Grants/tax credit 20.9% $1,500,000
Total sources 100% $7,160,000

The Company is seeking HUD HOME funds through the City of Newark, Low Income Tax Credits, and New Markets tax credits through new applications with the federal government and through banks that have tax credits currently. Other debt, grant and tax credit partners being approached include Abundant Capital Group, Berkshire Bank, Esra Realty, N House Funding, New Jersey Community Capital, New Jersey Redevelopment Authority, Prudential Foundation, The Wessex Group, Investor’s Bank (NJ), US Department of Housing and Urban Development, City of Newark NJ (Various Programs), Federal Home Loan Bank, JP Morgan Chase – Advancing Black Pathways Initiative and Local Initiative Support Corporation (LISC) NJ. More will be added as needed.

You can download detailed project financials here.

An 8% annual preferred return is being offered to Investor Members plus 25% of net cash flow. We expect to refinance the Project in the third year of operations. Concurrent with this refinance, we expect to repay the majority of the equity invested in year 3 and the remainder in year 4, with the building being sold at the end of 10 years. Returns are planned to be paid on a periodic basis quarterly.

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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 their Preferred Return of 8% 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 for any prior year.
  3. Third, the balance of the Available Cash, if any, shall be distributed to the Investor Members until they have received a return of any Unreturned Investment.
  4. Fourth, the balance of the Available Cash, if any, shall be distributed
    1. 25% to the Investor Members; and
    2. 75% to Sponsor as a promoted interest.

Over the period of 10 years, the Company expects to distribute the following approximate returns on total members investments of $600,000:

  • $208,000 in preferred return
  • $600,000 in equity returned
  • $222,709 in profit-sharing of cash flow; and
  • $838,135 in profit-sharing from sales proceeds.

The total returned on the full $600,000 is expected to be approximately $1,852,844, including equity returned.

The anticipated return for an investment of $5,000 is approximately $15,440.

You can download the details of estimated returns over a 10 year period here.
 

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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.

With unemployment reaching levels not seen since the Great Depression, by some estimates already 20% and rising, we are already anticipating a number of negative effects from the COVID-19 pandemic. We believe that construction, lease-up, and rentals may be impacted:

The COVID-19 pandemic and its attendant effect on markets and commercial activity is presenting a range of challenges to engineering and construction (E&C) projects — challenges that could deepen depending on the severity and length of the crisis in the US and globally. Uncertainty surrounding the duration and severity of this crisis make it hard to anticipate how a recovery could unfold for the project.

Our construction project may be delayed, and but most likely not canceled, as a result of the impacts of COVID-19 on the companies and governments that have partnered with us. Further, possible supply chain bottlenecks of equipment and materials — including structural steel and glass from Asia — could cause project delays, or reduced spending on future costs.

The most immediate impacts will possibly be felt at the subcontractor middle market of the project, as the specter of potential construction site shutdowns loom in the wake of recent decisions to do so in New Jersey. Subcontractors may be especially vulnerable to bankruptcy, which could occur after a site shutdown of only weeks. 
Government stimulus actions could throw a lifeline to this project — via a package of tax benefits or direct cash disbursals — potentially making situations more tenable for our subcontractors. But the timing is critical. A stimulus package could also prevent an upward ripple effect on our ability to secure construction labor in the short term. Equally important, preventing a possible meltdown in the middle-market segment could avert a drain of skilled laborers and help prevent delays ramping back up once the crisis is over.
Clearly, we are not alone. The COVID-19 outbreak is causing widespread concern and economic hardship for consumers, businesses and communities across the globe. The situation is changing quickly,  with widespread impacts.

Although we are working from incomplete information, we expect these trends to continue and perhaps accelerate, depending on the trajectory of the virus and the ability to re-open the economy. Among possible outcomes:

  • Occupancy levels might decrease, although they have not decreased yet as compared to the same periods in 2019.
  • We do not intend to raise rents until the pandemic eases. Depending on circumstances we could be forced to decrease rents.
  • We expect some tenants to relocate for economic reasons, from Class A projects to Class B projects and from Class B projects to Class C projects. In some cases tenants might leave the market altogether, by moving in with relatives, for example. Because we operate primarily Class B properties, we are uncertain whether the net effect for our properties will be positive or negative.
  • Conversely, we expect that economic uncertainty will cause some families to postpone buying a house and rent instead, increasing the pool of potential tenants.
  • 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.
  • If occupancy rates and rents decrease while delinquencies increase, we could be unable to meet our obligations as they become due. A reduction in cash flows and/or asset values could also cause us to be in default under the loan covenants under our senior debt. Either scenario could lead to foreclosure and the loss of one or more properties.
  • Lease-up activities may be delayed and altered to follow social distancing guidelines. 

At the time of this writing, New Jersey has “flattened the curve” by enforcing social distancing in public places, allowing children to attend school virtually, and requiring testing for all essential workers and services. Visit the New Jersey Covid-19 Information Hub for updated information.

At least in the short run we expect the pandemic to cause our revenue to decrease, perhaps significantly. As a result, we are taking steps to conserve cash. Among other things we have decided not to make any cash distributions until the economic outlook stabilizes and have reduced our staff. We have also begun to contact lenders to request a deferral of our mortgage loan obligations.

We do not know how long the pandemic will last or how its effects will ripple through the American economy. In a best-case scenario we would experience a short-term drop in cash flow and a dip in asset values as the economy adjusts to a new reality. In a worst-case scenario, where occupancy and rent levels drop significantly over an extended period of time, we would be unable to make mortgage payments and possibly lose assets, risking or even forfeiting investor equity if asset values drop far enough. Based on the information currently available to us we expect an outcome closer to the former scenario than to the latter and are marshalling all our experience and assets toward that end.

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Follow the change.